During the first 30 years of my career, I saw folks shorting stocks. And it was profitable. Not always. But then going long wasn't -- and still isn't -- the most profitable course at times. Then came zero interest rates and it seemed like everything went up and shorting became something only the brave -- or the stupid -- did, and at that it was only for a trade.
I thought of this on Thursday as we entered June, because I think we've all become somewhat conditioned to looking to buy, but not looking to sell. Everyone cites the handful of stocks that have moved the indexes and how narrow that part of the market has been. Myself included.
Yet if you look at so many charts, shorting in May was not only quite profitable, it was easy to find stocks to short. It was easier than picking the handful of winners.
Look at staples, using exchange-traded fund for the group (XLP) . The ETF is down about 10% in the month and it's not like it ever even gave you cause to fret on the short. I think it is oversold now so I would cover my short, but it's a perfect example, isn't it?
We looked at the SPDR S&P Metals & Mining ETF (XME) a few weeks ago, and I noted it broke $48, completing a head-and-shoulders top, but it had gone nowhere after that. In the last week it did finally move to the downside, tagging $44 before rallying; $44 had been the level I thought it would bounce from when we looked at the chart. But do I think it can cruise back up through $48? No I don't. In any event, it's down 20% since April.
We looked at Deere (DE) at the same time and I drew in this same line. It was down a bit more than 10% in May and with the exception of the day, it reported earnings (and clearly did not mention AI) it gave you no reason to cover the short. It should bounce off this line. But that's the best I can say.
Remember when everyone loved Wynn (WYNN) ? It was down nearly 20% in May. I thought everyone was vacationing?
Then there is Starbucks (SBUX) , which is down a bit more than 15% in the month. Another good short. It is now at support so it too should bounce but the stock is flat on the year.
Let's not forget Nike (NKE:NYSE), which broke down from a double-top and is down 20% in the month. Even if you wanted to wait for the break of the line at $115 you still made money on the short side. It's got support around this $100 area. There is also a measured target there.
My point is that this has been a stock-pickers market. It's narrow picking the stocks on the upside, but there has been plenty to choose from on the downside. Let's focus on all stocks, not just the ones that go up.
One last note is that the indicators did not change much with Thursday's rally. And shockingly, the Daily Sentiment Index for the Volatility Index ticked up to 13. I can't say why, considering the VIX was down so much, but I don't make the rules.
