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Sector Rotation




Here's a follow up to your comment on the buzz regarding yesterday's rotation out of SOX and into DRG (drugs). I looked for recent occurrences where the drugs were up at least 3% and the semis were down at least 2% on a single day. Actually, I thought the rotation would imply a defensive shift in the markets and that lower prices were to follow for the SP. However, the only real observation I can make is that the rotation continues. There were 11 occurrences. The Drugs continued the rally over the next 10 and 30 days more than half the time and the Semis continued the decline more than half the time.

I was most surprised that the last two occurrences came just after the SP made a significant low (next days were sep 28, 2001 and july 26, 2002). However, an occurrence in early March 2000 sure sticks out! Here's the data. Remember, past performance does not indicate future results.

No positions in stocks mentioned.

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