For this month, the cycle/relative strength concept is applied. First, the S&P 500 stocks are ranked from the best performer to the worst by calculating the expected return in that month. The top best traditional performers in the month were then screened for relative strength by a unique measure that sorts by several relevant time periods. Those that pass both screens are buys for the month. The stocks that are both weak monthly performers and weak relative performers are short sales for the month.
The markets are expected to be weak.
This process has been applied to the S&P 500 stocks by buying the top 5 rated stocks and by shorting the 5 lowest rated stocks. Application to the S&P 500 reveals that since January of 2022, the top five long stocks have outperformed the short sales by 138%, and have exceeded the S&P 500 by 56%. The short sales fell by about 31%. In April, the long selections fell by 0.67% versus -2.64% for the benchmark and a -4.30% drop for the short selections.
Here are the top five long recommendations for this month:
Micron-MU
Progressive-PGR
HAS-Hasbro
Hasbro
Wells Fargo
Wells Fargo
-WFC
American Express
American Express
-AXP
Here are the top five short recommendations for this month:
Healthpeak Properties
Healthpeak Properties
-PEAK
Walgreen Boots-WBA
Globe Life-GL
PENN Entertainment-PENN
Old Dominion Freight Line-ODFL
Hasbro is in a new relative uptrend. The last earnings report was a positive surprise. In the weekly strip, we see the breaking of a relative two-year downtrend. Monthly, there are higher lows in momentum. This is one of the few larger-cap stocks that is not overbought. Hasbro could add another $8 to $10 to the $70 area. The stock has risen 64% of the time in the month of May over the last 44 years.
Hasbro Daily, Weekly, Monthly
Old Dominion is an extended stock that has broken down and remains overbought suggesting much room on the downside. In the weekly strip, note the relative strength breakdown. Monthly, the stock is still overbought despite the recent weakness. The relative strength trend line from 2019 has been broken to the downside. This is the weak part of the season for these shares. The downside target appears to be the $150-$160 level.
Old Dominion Freight Line Daily, Weekly, Monthly
