It really is a tale of two markets right now.
If the only exposure you get to the market is from the local evening news, you'll know that the Dow Jones Industrial Average has seen a 500 point selloff.
But if you've been watching other indexes like the Russell 2000 or the Nasdaq Composite, you know that we're hitting new relative highs.
So what gives?
There is a massive rotation going on right now, and it's partly due to the risk that treasury rates will continue to stay elevated.
If you have a stock that has a dividend yield of 2.5% and the 10 year treasury is going for 2.8%, you may get better risk adjusted returns in the bond market.
So if everyone is selling their dividend stocks due to rate risk, that's where much of the weakness is coming into from the Dow and the S&P.
Flowing Like Water
And where is the money going to?
Those high-beta tech names.
If you've been following AMZN, BIDU, NFLX, TSLA, and FB this whole time, you wouldn't even know that there was a selloff going on.
The relative strength "stock picking" trade has done very well over the past few months, and there's no evidence that it is slowing down.
If you're looking for trade ideas on stocks with good liquidity, I'd start with this screener here.