Here is why many get the stock screening wrong

Aug 8

The market shows healthy breadth and quite a few sector ETFs are in positive momentum/trend.

Yet this information is incomplete—and it still does not tell you where you should put your money. Here’s why.

1️⃣ What do we observe?

• SPX is in Acceptance.
• NDX is moving from Recovery toward Acceptance.
• Breadth is healthy. Volatility is normalized. Participation supports price.
• TradeSentinel absolute sector view show strength across Technology, Financials, Industrials, Healthcare, Materials and parts of Energy.

So the first conclusion is obvious:
Risk-on. Broadening participation. Plenty of sectors look healthy.

2️⃣ But that conclusion is incomplete.
Absolute charts answer: “What is going up?”
They do not answer: “What is actually outperforming the market?”

And that difference matters. A sector can have rising moving averages, positive momentum and a perfectly healthy chart and still underperform SPY.

3️⃣ This is where the ratio view changes the picture.
Once sectors are measured against SPY, the broad strength becomes much more selective.

• Software and Financials stand out more clearly.
• Small caps and equal-weight Nasdaq are improving.
• Technology remains structurally strong.

But some sectors that look fine in absolute terms—like Staples or Real Estate—look far less attractive on a relative basis. Energy also shows the tension between strong longer-term performance and softer current relative momentum.

That is the “aha” moment: A sector can be bullish and still be the wrong place to be long.

4️⃣ What does this change for a trader?
Two things:
Holdings:
You may keep owning something because it is “still going up” while capital has already moved somewhere stronger.

Screening:
You may spend time looking for stocks in a healthy sector that is actually losing the relative-strength battle.
That is hidden opportunity cost—and hidden portfolio risk.

The framework changes the question from:
“What is trending up?”

to:

“What is trending up, improving, and outperforming?”

That is the difference between simply participating in a (bull) market and being positioned where the market is actually rewarding capital.

Aug 8

Note

Core longs to lean into 👇

IGV / Software
One of the cleanest combinations of absolute + relative momentum.
High priority for stock screening.

XLF / Financials
Strong absolute structure.
Strong relative structure.
Matches the improving multi-timeframe FinViz profile.

XLK / Technology
Remains a core structural leader.
But increasingly compete for leadership rather than assuming Tech automatically dominates every screen.

XLI / Industrials
Excellent absolute momentum.
Relative confirmation is less clean, so prioritize individual names showing superior RS.

XLV / Healthcare
Strong absolute conditions with developing relative improvement.

Aug 8

Note

Areas to watch for rotation 👇

IWM / small caps
Intermediate relative strength is becoming constructive.
A further improvement in the 20-day relative trend would materially strengthen the broadening thesis.

QQQE vs QQQ
Equal-weight Nasdaq is showing healthier internals than cap-weighted Nasdaq.
Continuation would suggest broader growth participation.

SOXX
Absolute repair is underway but semiconductor relative leadership remains mixed.
A 50-day flip would be particularly useful.

XLE
Still has strong longer-term momentum history but needs current relative structure to stabilize.

Aug 8

Note

⚠️ Key flips to monitor

IWM/SPY 20-day relative trend → positive
Would strengthen the small-cap broadening signal.

QQQ/SPY short-term trends → positive
Would show mega-cap growth reclaiming relative leadership.

SOXX/SPY 20/50-day trends → positive
Would confirm semiconductors rejoining Tech leadership.

XLE/SPY price relationships → positive
Would signal Energy's pause is resolving.

XLV/SPY longer-term relative trends → positive
Could elevate Healthcare from rotation candidate to durable leader.

XLC or XLU relative structure materially improves
Until then, treat strength there as countertrend/noise rather than leadership.