Four-Day Selloff, But Relative Strength Tells a Different Story

jfsrevg
12-18 21:43

Relative Strength Emerging Across Pockets of the Market During the Four-Day Selloff

4 straight days of sustained weakness, wiping out 13 days of index gains since the post-market breadth exercise I shared below, posted ahead of the first red day where I clearly flagged the need for caution. This is a simple exercise anyone could apply, as it’s ultimately a function of short-term breadth extension—levels where the market has historically shown a strong tendency to retrace once breadth becomes this stretched.

The latest session was largely news-driven imho, with mega-cap tech in $Technology Select Sector SPDR Fund(XLK)$ and $Vanguard Mega Cap Growth ETF(MGK)$ pressured after reports that funding for $Oracle(ORCL)$ $10B Michigan data center was pulled. This raised concerns over financing risks and potential cancellations across the hyperscale AI buildout, weighing on the already rich valuations of growth and energy names from the AI rally eg. $Constellation Energy Corp(CEG)$ $Bloom Energy Corp(BE)$ $GE Vernova Inc.(GEV)$ $Advanced Micro Devices(AMD)$ $Micron Technology(MU)$ $NVIDIA(NVDA)$ $Alphabet(GOOG)$ $Broadcom(AVGO)$ $Intel(INTC)$

That said, there are still multiple pockets of relative strength emerging across the market. Some may feel discouraged after getting late stopped out across several positions today and choose to sit on the sidelines going forward, but this is precisely the period to put in extra post-market work—refreshing your watchlist and tracking emerging RS group names, especially those printing new RS highs despite yesterday’s selloff.

No one can accurately forecast short-term market moves, but there are plenty of “rubber ball under water” industry group action developing beneath the surface. These are opportunities you shouldn’t ignore and should be ready to capitalize on as the market recalibrates for a move higher, even if it’s just a lower high in the near term. These are the situations where I often outperform many of my peers in managing their portfolios. Check out the VARS moves in $Direxion Daily Regional Banks Bull 3x Shares(DPST)$ on 25/11 and $iShares Silver Trust(SLV)$ on 26/11—these were the strongest RS group prior to their move as the indexes emerged from correction territory (downtrend channel). They remain above their 10-MA without violation.

Now, take an hour to analyze the stocks within the groups below, I hope it gives you a fresh perspective on this selloff.

1-Month RS New High Industry Group After $SPDR S&P 500 ETF Trust(SPY)$ $Invesco QQQ(QQQ)$ $iShares Russell 2000 ETF(IWM)$ Sell Off

$SPDR Gold ETF(GLD)$ $abrdn Physical Palladium Shares ETF(PALL)$ $INVESCO LEISURE AND ENTERTAINMENT ETF(PEJ)$ $Amplify Seymour Cannabis ETF(CNBS)$ $SPDR S&P Bank ETF(KBE)$ $SPDR S&P Regional Banking ETF(KRE)$ $AdvisorShares Restaurant ETF(EATZ)$ $iShares Silver Trust(SLV)$ $Global X Copper Miners ETF(COPX)$ $Roundhill Sports Betting & iGaming ETF(BETZ)$ $Amplify Digital Payments ETF(IPAY)$ $VanEck Junior Gold Miners ETF(GDXJ)$ $Amplify Junior Silver Miners ETF(SILJ)$ $VanEck Steel ETF(SLX)$

$VanEck Agribusiness ETF(MOO)$ $iShares Global Timber & Forestry ETF(WOOD)$ $SPDR S&P Insurance ETF(KIE)$ $VanEck Gold Miners ETF(GDX)$ $INVESCO FOOD & BEVERAGE ETF(PBJ)$ $SPDR S&P Retail ETF(XRT)$ $Global X Silver Miners ETF(SIL)$ $SPDR S&P Global Natural Resources ETF(GNR)$ $iShares U.S. Broker-Dealers & Securities Exchanges ETF(IAI)$ $FlexShares Morningstar Global Upstream Natural Resources Index Fund(GUNR)$

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