The S&P 500 ran 90 points today. Every sector lit up green.
Tech, financials, cyclicals. All of them.
I was short KNX the entire time. I got in at $60.50 and covered 25 shares into the morning weakness.
The rest of my position sat there doing nothing while the index screamed higher.
That stock did not go up. It did not participate.
The S&P was having a party and KNX was not invited.
How did I know about KNX?
It’s been popping up on the Genesis COG scanner for a couple of weeks now:
You see, most traders spent today trying to short the index into a bullish flag formation. That is a death sentence.
Algorithms rig flag formations…algorithms that my Genesis COGs scanner follows.
They jam price higher and draw in more capital until every short is carried out on a stretcher.
I have hundreds of thousands of dollars in losses from fighting flag formations over 39 years. I stopped doing it.
Instead, I learned to find what the market is leaving behind and trade against that.
The Defection Setup
I do not trade the S&P 500. I trade individual securities that defect from the market.
That distinction is everything.
When the index is ripping higher, most traders either chase it long or fight it short. Both approaches hand money to the algorithms.
There is a third option. You find what is diverging from market leadership and position against that instead.
Today, I pulled up the IYR against the S&P on a five-minute comparison chart. Early in the session, real estate carried the market higher.
By midday, it was defecting. The IYR was up seven tenths of a percent while everything else was up a percent and a half.
That divergence is where the money lives.
- The IYR led the morning rally but could not hold its leadership into the afternoon
- XLK and XLF stayed in lockstep with the S&P all day
- KNX never participated at all, falling while the index climbed
When you overlay these lines on an intraday chart, leadership becomes visible in seconds. You do not need a formula or number crunching.
You just need to see which line is pulling away from the pack and which one is sinking beneath it.
If you short what nobody is selling on a day like today, you’re fighting the S&P.
You are positioning against the most heavily capitalized sectors that are all moving in unison.
That is why you keep losing money. The structure is telling you that machines are buying.
Institutions are not shifting their money flow. There is no purpose in fighting that.
I short things that defect. I short things where the algorithms are walking price down while the broader market moves in the other direction.
My longs make money on the way up. My shorts make money on what gets left behind.
That is how I had a phenomenal day while the S&P ripped 90 points and most bears got squeezed.
The Comparison Chart Method
This takes less than a minute to set up on any platform.
Convert your chart to a line. Overlay a second symbol.
The two lines will weave around each other like a DNA helix. When your primary line rises above the S&P line, that sector is leading.
When it sinks below, it is defecting. The farther apart they drift, the stronger the signal becomes.
I taught this to my graduate students at Loyola. Two of the six groups used comparison charts in their portfolio methodology.
Their risk adjusted metrics were beautiful. Their outperformance was insane.
One of them told me he never knew what it was until I taught him. It is that simple and that overlooked.
Position With the Machines
The market rewards strength on days like today. It punishes weakness.
If you are long the leaders and short the defectors, you make money regardless of direction.
The Genesis COG System runs scans across sectors and individual securities to identify where institutional money is flowing and where it is draining.
It tracks comparison charts, relative strength readings, and leadership rotations so you do not have to eyeball 500 stocks every morning.
When the next leg down arrives, the defectors will fall twice as fast as the index.
Everyone else will be scrambling for the exit.
See how the Genesis COG System identifies defections before the crowd reacts →
Professor Jeffrey Bierman
Creator of the Genesis COG System