Once upon a time not very long ago, the term âsector rotationâ meant something entirely different than it did now. It used to mean a simple transitioning of money between groups of equitiesâ¦into tech out of financials or out of speculative stocks and into conservative stocks. Now, it has taken on an entirely new meaning. The new paradigm centers upon the hypothesis that entire sectors may be absolved of any opportunity to achieve profitability due to presidential politics. Now, I like to keep politics out of this as it is a day trading blog, but sometimes particularly when perceptions can shape reality, it is worth touching on. The best example is the healthcare companies. Coming off a persona tragedy made more complicated by difficulties with insurance companies, well, I donât have a high opinion of health care entities right about now because of all of the hassle. However, focusing on numbers (which is cold, but I am making a point), the destruction of wealth to people who work for these companies is enormous as well as overall re the public vs private debate is enormous. The money that will be (theoretically) saved is (definitely) being more than replaced by the loss of jobs and the incentive of doctors (right or wrong) to do as good of a job because they don't get paid as well. And second and more on point, there is a massive fear of "who's next." I see it every day. Earlier this week, it was the life insurance companies...Met, Prudential, Hartford Life, and so on. Are we supposed to buy our life insurance from the government? Monday, it was the airlines...United, Delta, AMR. Are we not supposed to have an airline industry? Last week, it was the newspapers (NY Times, Gannett). Basically, investors are petrified because nobody knows what is next and that perpetuates this crisis. The average American investor has lost more than half of his/her money in the stock market in the last 16 months. So, even though it seems trivial and theoretical re things like the health care companies, leaving politics out of it entirely except to note that government bureaucracies are as bad if not substantially worse than private entities, the real destruction of wealth resulting from all of this is devastating. And these days, sector rotation is âwhich sector is going to race to zero.â On a day trading basis, all sorts of opportunities (and pitfalls) are created as equities like the banks will remain volatile yet susceptible at any given moment to a rumor. The markets in Asia were mixed with Tokyo up 2%, but Hong Kong down 1%. In Europe, bourses are getting drilled to the tune of about 2% to 3% across the board. Oil is falling back and the dollar is stronger. Essentially, the âChinese planâ failed to live to the hype so right back down we go. Combined with all the downgrades, It is just not good. Futures are indicated sharply lower. There will likely be some weak attempt at a rally at some point, but the mood is pervasively negative. Ahead of the jobs report tomorrow, look for a bit quieter day than yesterday in a choppy range, but all to the downside unless there is some wild abolishment of the âmark to marketâ rumor which would cause another round of short covering. Reiterating- Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea. If the whole story is not there - If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified- Good- The following stocks have good news and/or a strong technical pattern GA- good earnings MR- beat on quarterly earnings SIGM- good earnings WTW- terrific earnings ADBE- preannounced slightly to upside on earnings guidance HIG- rumors abounding that company is trying to sell its life insurance division GE- company said it sees no needs to raise capital and that it is âwell positionedâ in this difficult environment; CFO on CNBC this morning said that GE capital is ânot a timebombâ DRYS, EGLE, GNK EXM- dry bulk shippers had a great day yesterday; momentum may continue today particularly if they open lower URS- closed near a high after posting great earnings IDT- exploded higher yesterday amid rumors of an oil deal with Total D, JOYG- mentioned on âMad Moneyâ last night CNQ- beat quarterly earnings estimates handily Bad-The following stocks have bad news and/or a weak technical pattern MATK- bad earnings PETM- poor earnings GYMB- wretched earnings warning for next quarter WFC, JPM- put on ânegative reviewâ watch list at Moodyâs GM- indicated it will likely have its auditor issue a âgoing concernâ letter somewhat soon GIL- closed at a new trend low BYI- closed near a new trend low AL- closed at a new trend low SOA- closed at a new trend low Earnings: THURS MAR 5 BEFORE ABV CIEN GCO URBN WNR THURS MAR 5 AFTER BOOM CLNE CLWR COO EBS FRP FSYS IPI MRVL TNE WIND Good luck today. Erik R. Kolodny
I like the way you look at some things. The above quote....is your opinion that M2M will not be abolished or were you referring to the abolishment of the rumor itself? Not looking for a call so much as just curious what you think.
Sorry if I wasn't clear. Supposedly, there is a committee in Congress discussing the abolishment/abatement/halting of M2M for a period of time. Let's say that details begin leaking out as to what may/may not happen, it would cause stocks to vacillate wildly. So, I have no clue what will/will not happen, but what I am saying is that if more definitive rumors occur (which may/may not happen), it would cause a massive swing. Yesterday when the initial rumor came out, the markets took a quick pop. Thus, I know I am being vague and apologize...but, let's say the Dow is down 100 ponits...they decide to halt M2M, the Dow could rally 200 points fast. I cannot predict it nor do itry to; I am simply noting that we all need to keep an eye out for it.
Unfortunately, the balance of your commentary did nothing towards your original premise. The meaning of sector rotation has not changed at all. Everything else was purely your (still) unsupported opinion.
I am not sure what you mean. I just re-read that three times. I gave the examples of the healthcare industry sector, airline sector, and newspaper sector all having individualized worries in the last few days, i.e. those were the biggest losers based on the news of the day. For instance, today, banks happen to be the biggest losers. Ergo, 'sector rotation' now means smashing differing sectors to bits on any given day. I even said this in the piece: "And these days, sector rotation is âwhich sector is going to race to zero.â On a day trading basis, all sorts of opportunities (and pitfalls) are created as equities like the banks will remain volatile yet susceptible at any given moment to a rumor." I apologize if I wasn't clearer; I truly do not know how I could have made it clearer.