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I am a big fan of relative strength, but not when it comes to buying stuff. In fact, I tend to scoff at the idea of buying breakouts or new multi-month highs in things. It's silliness and it's unnecessary (like paying up for an IPO) and it generally leads to increased risk. If I can't buy something on weakness, I skip it. People who have to own Apple (AAPL) when it breaks out to a new high or Facebook (FB) when it pops to a multi-week high are just asking for trouble. That's not my thing. I'd rather buy something that is out of favor, whether it's an individual stock, an index, or an exchange-traded fund.

When I already own something and it's outperforming everything else, surging to multi-month highs, I am not inclined to buy more of it (though I know that some speculators have done quite well with that approach). In fact, I am on the lookout for spots to take profits. That was the case today with the Dow Jones Industrial Average, as I had recently picked up some Dow positions when it was getting slammed a few weeks back, like on June 28, when it was off 159 at 12,468. Today, the Dow and S&P 500 popped to new multi-month highs. So you know what I was doing, right? I was selling. In fact, for the first time since that purchase on June 28, I dumped all of my Dow positions at Rydex. I got the morning pricing of 12,913. Not the high of the day, certainly, but here's the important part of this story: It wasn't just about selling the Dow. It was an arbitrage of sorts. While I sold the Dow, I bought some positions (about half as much, in fact) of the Russell 2000, also at the morning pricing of 803.06. Let's look at this strategy of selling strength and buying weakness, which is pretty much what I did....630 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.