How to Outperform S&P 500 when there’s Blood in the Streets?
Here are our stock trades/set-up explanations & Rationale for picking these trades.
I love building analytical tools that enable me to empower my personal investment decisions and thus born WIBE, a platform for momentum investing & trading.
I am sure most of you are bleeding like I do, as the markets are correcting in these last few weeks. Holding on to S&P 500 ETFs like VOO and averaging it is what most people do, and I have been doing the same. However, during this correction, I wanted to find momentum in the markets.
There is always a bull market like a Sun and sunshine somewhere.
We built an analytical tool at WIBE to find that bull to ride along with it.
Did we find it?
For discussion, let's assume that we do not understand inflation, geopolitical crisis, FED interest rates, etc. All we have is some analytical tool that runs on an algorithm (based on mathematics and statistics along with technical indicators). The tool tells us that S&P 500 has been entirely out of sync with these sectors for over two to three months. We observed the stocks in these sectors, and they were flying as high as rockets.
Without much further ado, let's reveal the bulls!
The bulls in the current markets are:
From the above image, as you can see, the S&P 500 (the index) is ranked seventh (WIBE rank). For simplicity of presentation, we have removed the technical indicators and presented some critical data. The WIBE score for the energy sector is far higher than other sectors indicating extremely bullish momentum. Next comes the consumer staples and utility sector, which are also bullish.
Why did these sectors outperform S&P 500?
We have to refer to the S&P 500 sector break-up and % allocation towards its constituents to understand this.