sector rotation strategy

Discussion in 'Technical Analysis' started by emk662, Apr 23, 2004.

  1. emk662


    The market force in these weeks quickly switched its firepower from Financial-> Drugs -> Tech.

    Where can I find some info. or knowledge about the strategy/thinking of those sector rotation? There is enough sector rotation about economics, but little about the trading.

  2. ig0r


    It's about as hard to predict as predicting where the dow will be tomorrow ;)
  3. WinSum



    Can you please post the links to the economics site on sector rotation. Like to see the macro view too.


  4. maxpi


    One form of sector rotation is to select the best performing sector and buy issues within that with strong RSI.

    Sector rotation works great during a boom but it loses badly during a bust. One fund averaged 23% annually from the mid 80's to 1999, can't recall who it was with. They never disclosed exactly what they were doing.

  5. This is very important stuff.

    An Excel sheet is an easy way to accomplish this stuff. Prior to the invention of spread sheets it took a little doing.

    It operates in a modus about equal to IT trending of equities.

    One of the very fortunate things is that there are always opportunities.

    Fortunately, the relationships of the key variables to use for analysis are such that they all are leading of price moves of equities in any perticular sector.

    Personally I use about 200 separate sectors and I monitor their first derivatives to see how fast they are coming on and how fast they are exiting. Usually in most data bases you can also sort the constituents of each of the sectors to also determine the best money making ones to use.

    Just for humor and contrast, MR market tries for the last 15% of a move using his inane selection process. Most of his selections are often "spent" and actually are candidates that fall into sectors that have peaked and are commencing their retreat.

    He chose a housing construction equity this way recently. A longtime before that I suggested HOV to him as an alternative to another of his mispicks as it was proceding to be part of that sector move. I saw it as it came off base of 10 or so going to the top.

    What you are addressing is the beginning of 400% moves like HOV's.

    Any sector moves relative to others before it's components begin they cyclical price moves in that sector.

    I use three levels of duration to do analysis: short term, intermediate term, and longer term. the rate of change (first derivative) in each of the term durations, strikingly points out what is coming up.

    Long ago (late 50's), sector analysis was not popular to any extent. Data was sparse as well. I felt it was important, though. My compromise then was to focus on sectors that were, in turn, driven by sectors closer to ultimate consumers. I figured that they were like a ice skater at the end of a whip. It turned out to be correct. You will see this phenomena at play today as some sectors accelerate (second derivative) past the sectors they supply. With the invention of bytes as an alternative investment to molecules, all of this is even more amplified. The advent of "bubbles" is another example of sector emphasis.

    Getting this down is one of the most rewarding things going. If you look around you will see that very wizards got this down.

    While I remained an amateur all my life. I was paid a portal to portal courtesy by a NYC based institutional investment advisory firm in the early 60's, to commute from Greenwich to attend luncheons mostly related to institutional white paper sector analysis. Asked but never did it, I was also asked to tour Europe quarterly, on this subject as a presenter for big money II.

    Sector analysis would be a terrific replacement for what the financial industry thinks is "research" and market analysis today.

    Once you get it all down, you will find it scares the $hit out of others who are really skilled in near term stuff.
  6. ig0r


    If a sector begins to move very quickly in an intraday timeframe (high rate of change), you are saying that this will carry through into intraday (over next few days) more often than not?
  7. Very much so. Note carefully that the volume magnitude can be an order of magnitude as well. Use agregate volume.
  8. And you heard it live on Et...

    What will you folks do with this info?...take a gander at it.

    Michael B.

  9. ig0r


    So volume of all sector stocks combined and look for strong increase along with high rate of change as a whole?
    #10     Apr 23, 2004