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Watching Rotation

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The best time to look for where money is rotating is during times of equity market consolidation. Such has been the case over the past two months. The S&P 500 is basically unchanged and in a range since June 9th as the overbought condition is relieved (Exhibit 1). Because it is the second month, we believe now is the time to look at which sectors are acting significantly better or worse than the overall market in order to see what may be a theme going forward.



Those that are outperforming the S&P 500 during a market wide consolidation period may offer an early indication of future strength, especially since the move off the March low was so broad. As the market experiences broad gains as was the case from March-June and the pace of gain slows (consolidation period), portfolio managers have time to "pick their favorite areas" versus broadly increasing exposure off a low that has limited new fundamental data.

What Seemingly is Attracting Money?








What isn't Attracting Money?

Now that we have identified what has been doing better than the overall market, as measured by the SPX during the recent consolidation phase, what hasn't performed well may offer indications of underperfomance going forward:







In sum, these trends could always change during the rest of the consolidation process, but enough time has elapsed to make some accumulation and distribution relative strength assumptions. Even if the market encounters further correction, we expect the above trends may offer some important clues.

No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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