Sector rotation lag question

Discussion in 'Trading' started by jj90, May 24, 2011.

  1. jj90


    Hello Gents and Ladies, please note 1st that I don't do sector rotation trading even though I keep an eye on it, but upon contemplating this method I have a question:

    Is there a 'lag' between money outflow/inflow between sectors? And following on that, what is the usual lag period?

    Example: Let's say in the current econ cycle there is a rotation into healthcare from energy. And that also in the current econ cycle healthcare is directly furthest from say tech.

    Does one go long healthcare short energy or long healthcare short tech?

    The assumption here is that if there is no lag (unlikely) the greatest outflow would come from energy, but if there is a lag since tech is the furthest away in the econ cycle, that demand is weaker relative to energy.

    I read my post above and I guess what I'm trying to say is which would be relatively weaker, the monetary outflowing sector or the sector furthest from the current inflowing sector.