As the market has become increasingly mixed, it's time to switch up our strategy a bit.
As we outlined in our post yesterday, for the first time in about a year, we are shorting stocks.
But this statement requires an asterisk...
We are shorting some stocks. And at the same time, we're still buying the leaders as plenty of stocks continue to show impressive strength -- particularly those with cyclical or value characteristics. That's where we're focusing for long ideas.
As for shorts, it's all growth. That is where the weakness is. We're not only seeing deterioration and relative weakness at the index level for growth stocks -- the internals are also deteriorating beneath the surface.
This is simply a tale of two markets. As growth-heavy averages like the Nasdaq roll over, the leadership areas are registering bullish breadth thrusts and carrying on higher like business as usual.
Does one of these groups eventually catch up or down to its peers? Maybe. Probably. But it sure isn't happening yet...
For now, all we can do is trade what's in front of us. Right now, all the evidence is suggesting we fade growth and continue to buy value.
In case you're wondering how we came up with these shorts, allow me to explain. We created a universe of stocks based on short and medium-term relative weakness. Then, we overlaid our usual filters such as proximity to new lows and whether the stock is in a bearish momentum regime or not. From there, we simply scanned through these names for the best setups.
With that as our backdrop, let's check out some additional short setups in these weak stocks.
You need to have a subscription to access this content in full.
