I am coming back to a familiar theme in this article. After all, when the market has had a good run ( which would be one way of describing recent price action) that has seen the S&P 500 gain more than 10.00% in the space of three months, posting numerous all-time highs on the way through.
War? What war?
Source: Barchart.com
Of course, not every stock has had a good quarter. In fact, there are 150.00 stocks in the S&P index whose 3-month % change is -10.00% or smaller.
43 of those have fallen by at least -20.00%, and 10 by -30.0% or more.
Are these stocks permanently down and out?
The analytical trader's job is to sift through those 150 names to try to find those rubies in the dust stocks that have been incorrectly hit or hit too hard, and then to identify what it would take to make them reverse course.
However, even if you were able to research 10 stocks a day, Monday to Friday, it could take you three weeks to go through the list. But by the time you have done that, the goal posts could have shifted completely.
One way to cut down on time researching would be to use an AI to do a lot of the legwork. I am in two minds about AI in trading because there are question marks about its accuracy and reliability, but when it comes to sorting data, especially data that you are going to review after it has been, then I think it has a place.
So, to set the ball rolling, I downloaded a spreadsheet that tracks the S&P 500 stocks and the period performance, and I asked Perplexity AI to search for stocks that had a negative 3M % change and having done that, I asked it to select 10 names that it felt had the potential to recover.
The results of that query are shown in the table below:
Perplexity output
I also asked Gemini in Google Sheets to take a look at the same data.
This time I asked the AI:
“Can you find the best 10 stocks that have negative 3M %Chg but positive 1M %Chg, 5D %Chg and %Chg 3D Ago fields?”
And this is the table it produced:
Gemini output
Interestingly, there is no overlap between the two outputs.
Monitoring performance
I am tracking the tickers to be able to monitor their performance, and a few have got off to a promising start. The table shows the % Chg on June 2nd and that over the 5 days prior.
AI watchlist
Source: Barchart.com
Here are some of the top performers' charts.
Of course, it’s very early days, but they give a flavour of what might be possible or at least I think they do.
Aptiv Plc APTV
Source: Barchart.com
Freeport McMoran Inc FCX US
Source: Barchart.com
Axon Enterprise AXON US
Source: Barchart.com
Diversified Picks
What's interesting about the combined AI lists is that the stocks they have picked come from a wide range of sectors and industries, and only one stock is classified under technology. So there is an element of diversification built in, although that's not necessarily by design but rather by circumstances / prior performance.
That’s important in the context of market leadership, as we can see in the performance matrix below, information technology has trounced everything else over the last 3 months, driven by a frankly astonishing rally in semiconductors and adjacent sectors.
The SOXX Index ETF, which tracks the semiconductor industry, has added 71.0% in the last 3 months, which included a +40.0% gain in April.
Semiconductor Ishares ETF SOXX monthly % performance( Feb to June )
Source: Barchart.com/Darren Sinden
Leadership over three months
Source: Barchart.com
Pause for thought and catalysts for change
Now you might feel that with that kind of momentum behind it, the rally in tech and tech-adjacent stocks can continue for a good while yet, and I am not calling a top, far from it.
However, the pragmatist in me recognises that with the forthcoming IPOs of SpaceX and Anthropic, we have two highly significant events, which have the capacity to influence sentiment and the scale to distort market structure.
If they are successful IPOs, led by consistent and sustained investor demand, they might actually drive the technology sector higher still, but if either issue and particularly SpaceX, were to falter, then it could be a very different story.
And given that background, I think it's a good idea to be aware of opportunities in other areas of the market.
I will look at some more ways that we can find alternatives to tech in the next article.
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