In applying the cycle/relative strength concept for the month, S&P 500 stocks have been ranked based on expected returns, with the top performers screened for relative strength and considered buys for the month. Conversely, stocks that are weak monthly and relative performers are recommended as short sales for the month.
With expectations of weak markets in June, backtesting of S&P 500 stocks with at least 30 years of data reveals that the top five long stocks have outperformed short sales by 112% since January 2022, surpassing the S&P 500 by 51%. Short sales have fallen by about 30% during this period.
The top five long recommendations for this month include Citigroup, Costco, Progressive, Eli Lilly, and Johnson Controls. On the other hand, the top five short recommendations consist of Old Dominion Freight Line, Intel, Evergy, V.F. Corporation, and PENN Entertainment.
Citigroup is the highest-ranked stock, showing reversals of long relative strength downtrends with higher lows in monthly momentum, indicating a potential continuation of an upward trend. Additionally, Old Dominion Freight Line, while a shorting candidate, has fallen by 5.3% since being recommended last month.
PENN Entertainment appears to be a ripe candidate for a short sale, showing weakness technically with monthly cycle peaks and continued new lows in relative strength. With June historically being a weak month for the share price, there are no buy signals on any time frames, indicating a potential opportunity for a short sale.
