Are traders buying the rumor and selling the news when it comes to the president’s stimulus package working its way through Congress?

Stocks ended the week very overbought, as traders bid shares of financial and technology stocks higher. Evidence of this bullishness was apparent in our Top 25 PowerRatings roster, which now counts a high number of rated-7 stocks and a growing cadre of short exchange-traded funds (ETFs) among its ranks.

There are a number of ways to trade stocks and ETFs using Short Term PowerRatings. But one of the most overlooked is simply to use features like our Top 25 PowerRatings List to determine whether you should be in a buying mood as a short-term trader or a selling mood.

For example, when a short-term stock or ETF trader sees a Top 25 list that is full of stocks and ETFs with Short Term PowerRatings of 9 or 10, then that trader knows that the markets have pulled back significantly and that these pullbacks have resulted in a number of stocks being extremely oversold.

Because stocks and ETFs tend to move back and forth between oversold and overbought conditions as buyers and sellers rush into and out of positions, we know there is an edge in the short term to buying stocks and ETFs when they are oversold and waiting to sell them until after their prices recover.

Conversely, when we see that most of the high PowerRatings in our Top 25 list belong to short exchange-traded funds, or that a high number of top stocks only have Short Term PowerRatings of 7, then it is far more likely that any edges in the market are on the downside.

In these instances, we see very few top-rated stocks trading above their 200-day moving average. What we do tend to find above the 200-day moving average and pulling back nicely are short ETFs, which will make up the majority of our buying opportunities after the markets have moved significantly higher in a short period of time.

Here are some of the short ETFs and one bond ETF that have appeared in our Top 25 PowerRatings roster as of the Friday close. Short-term traders may want to keep an eye on these ETFs as markets become all the more extended to the upside.

ProShares Short S&P Small Cap 600 Short Term PowerRating 8. Relative Strength Index(2): 4.80

ProShares UltraShort QQQ Short Term PowerRating 8. RSI(2): 2.40

Vanguard Extended Duration Bond Fund Short Term PowerRating 8. RSI(2): 17.81

David Penn is senior editor at TradingMarkets.com. Visit TradingMarkets.com for more education, information and tools for shorter-term trading.