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Down or flat markets can be frustrating for most investors. The longer these corrective or churning phases grind on, the more natural it is to step away or "tune out" until the market becomes more constructive.

Yet if history is any guide, these difficult periods represent extraordinary opportunity for growth investors who know what to look for. In short, the price action you see in individual stocks during a correction provides specific clues that allow you to identify who the new leaders will be once the downturn has run its course. The type of price action I'm referring to is Relative Strength.

Let's take a step back for a moment and discuss what precedes an intermediate-term market top. Typically, a few weeks (or even months) before the broad market runs out of gas, the leading high-Relative Strength growth stocks undergo a "purging" phase. Basically, after a big run, investors collectively take a fresh look at which stocks have the best prospects going forward, and which ones have already seen their best days. The sell-off in the latter group is often swift and severe, making this a particularly painful and oftentimes confusing phase for longs (again, this often occurs well before any broad market weakness manifests itself).

Once the broad market correction gets underway, if you know what to look for it becomes increasingly apparent which stocks fall into the former group -- those names that investors believe have the best prospects. In short, a stock that holds up particularly well during a broad market downturn tells you very clearly that institutions are refusing to sell this name and are likely adding to positions on minor weakness -- even while they're lightening up on their other holdings.

In short, the small number of growth stocks that show unusual Relative Strength during a broad market correction are providing clear evidence that these are the names that the "smart money" believes have the greatest upside once the current correction runs its course and are positioning themselves accordingly.

Investors don't need any special software or data to screen for these new leaders -- they appear every Monday in Briefing.com’s Emerging Growth Stocks rankings. (Emerging Growth is just one of many features of the Briefing Investor subscription service). The key is to know what to look for and when to act.

The principle here is actually very simple: during a broad market correction, build and maintain a watchlist of quality growth stocks that show outstanding Relative Strength. The price action can either be sideways, modestly down, or grinding higher, and preferably holding near the 52-week highs. The more orderly the price action, the better, since it suggests disciplined institutional accumulation. (In other words, avoid stocks that appear extremely volatile, or "whippy").

Finally, time is a crucial element: the longer this type of price action occurs, the more bullish the pattern and the more powerful the breakout should be when the market finally turns.

Conclusion

Stocks that show unusual Relative Strength during a market downturn tell you very clearly that these are the names that institutions refuse to sell and are accumulating on even minor pullbacks. Since most funds predominantly use fundamental analysis to pick stocks, you can extrapolate that these institutions must have solid fundamental reasons for accumulating these stocks near their highs while the broad market is grinding lower.

Once it becomes apparent that we're in the midst of a broad market correction, watch the components of the Emerging Growth Stocks rankings to see which ones exhibit the following characteristics:

1. Orderly price action that holds just below the 52-week highs
2. Shake-out attempts that bounce right back (these are brief but powerful clues)
3. Leaders showing signs of "lining up at the starting line."

Once you see price action that suggests item #3, that's the time to go long or place your buy stops just above the range.