Hey Gang,
In the Grad call, we discussed the sector rotation model to determine how money flows through sectors during different times of the market cycle. Below is a copy of the model with the performance of various sectors over the past 2 weeks. According to the money flows, we are starting to see the early recovery stage of the market. During the past 2 weeks, very negative economic news has also failed to push the market to new lows. In order to really understand the sector rotation model the following points are key.
1. The stock market is a leading indicator for the economy…and therefore recovers before the economy
2. Different sectors lead depending on where we are in the model.
3. There is no set timetable for the various phases.
4. To use effectively, one must watch which sectors are outperforming.
Click chart for a larger version.
Happy Trades,
Jeff
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