On Monday the market rallied enough that the S&P 500 breached short-term resistance levels by going through its high of last week. Hopefully, that will remove some of the short-term selling pressure and setup a more positive June than we have seen this month, but lagging stocks and broken situations, such as Bitcoin remains things to avoid and get out of.
Whether the market is churning, or having a pause in a correction that will resume later, the fact is since the middle of February we have been seeing a big money rotation out of many things that were leading the markets to the upside in the final few months of last year and into new things. These new sectors barely fell when the market dropped in the past few weeks and are tending to go up more than the market when it has up days.
This is when Bitcoin and the crypto collectible coin market peaked and when so many of the fad stocks that make up most of the Robinhood 100 list also did. The ARKK ETF also began to dump and is now badly lagging the S&P 500 as you can see on this relative strength ratio on the bottom of this chart.
Yesterday, I did a post about how to beat the stock market going forward. This consists of two steps.
The first is to get out of now lagging situations if you are in them, such as the ARKK ETF.
The second step, is to refocus your energy on the things now beating the market.
If you want to beat the performance of the S&P 500 and be a winner then you need to be in the winning situations.
It’s as simple as that.
Doing the HODL game in broken investments in broken sectors and areas of speculation like collectible crypto coins is a LOSR strategy.
So, what is beating the market now?
I just ran a scan of all of the sectors of the market using TC2000 that are performing the best since that February peak.
Here are the ones at the very top.
The number in the far right performance is the percentage gain since the February peak in the ARKK and crypto.
The steel and aluminum sectors are at the top of this list with gains over 45%.
Next is shipping and ports up 44%.
If you can recall, I was banging the drum on shipping stocks a few months ago and bought a few in my own Robinhood account, which is focused on ten individual positions. One of the stocks I bought and still own is SFL, and I wrote about it for you on February 10, 2021.
Another stock I wrote about in February and bought is GOGL. I still own it now, and I did a post on it that month too.
Anyone who would have gotten out of crypto collectible coins in February and put that money into shipping stocks would now be crushing it.
Successful trading and investing is all about going with the money shifts in the market. We saw that shipping stocks were likely to come alive in February, just as it is obvious to everyone, except HODL folks, that crypto is now a broken dead money situation.
So, after those three sectors the next sector that has been smashing the performance of the S&P 500 since February is energy, including oil stocks, as you can see from the XLE ETF, which I own in my IRA.
And REIT’s as a whole are up over 10% too, since that February peak in the market.
I own the RWR in my IRA too.
Gold, silver, and mining stocks are not on the list, because they dipped at the end of February and made a double bottom in March. Since then they have been doing great, but other sectors beating the markets now include transportation, rentals, chemicals (which is tied to the agriculture sector), beverages, and home furnishing, where Home Depot has been pushing the sector up.
I still believe all of these leading sectors are still good buys for the rest of the year.
In February when I posted about these shipping stocks, that were completing “W” bottoms that month, I warned of a top in crypto and wrote this:
“There is real money in “W” bottoms in stocks paying big dividends. Dividend payments mean money and there is no more real money than gold. Bitcoin is crypto crap. I rather invest in a “W” pattern in a stock, which represents an ownership interest in a company doing something in the real world than in a virtual currency like Dogecoin. Virtual paper is junk that isn’t even junk in the real world. Don’t let anyone try to make you feel bad for “missing out” on some virtual coin, because those talking about it now on Facebook will never tell you when they sell and if they never sell they’ll never make money off of it…”
I still stand by this statement 100% – and I am repeating it so that the the crypto nut who keeps emailing me like a pest trying to tell me it is still going to millions, despite the broken charts, will see this.
I will not stop investing in shares of real companies over crypto collectible coins!
But that doesn’t mean we have to stop looking at the markets and focusing on it to see what might come alive next.
More stock ideas tomorrow.
-Mike
