Sector Rotation and Positioning

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by soozler

This isn’t a full DD post because I am too lazy to pull all the various numbers as statistics. It also isn’t really fundamentals, since those haven’t existed since March. But I would like to share my thoughts on where the market is headed.

Summary is: Sector Rotation for the next few months, lots of tendies to be made if you get ahead of it.

  • It’s likely that the SP500 stays at it’s current level +/-5% for the rest of the year. Anyone who has traded the market for more than the last three months, knows that movements in the SP500 are generally driven by certain sectors, and which ones move up tend to rotate over time.
  • The current gains in the SP500 are largely driven by big tech stocks (all of the gains in the NDAQ). Think: MSFT, AMZN, APPL and anything tech stock that is up 100%+ this year.
  • There are still sectors that have not come close to fully recovering. Like: Financials and Energy. We have already seen financials pulling the SP500 up last week. There is still a lot of money left to come back into the market, and if you are looking for deals you aren’t going find them in the likes of $ZM. Warren Buffet is an example of someone who has been dumping cash into Financials and Energy sectors. It makes logical sense to take profits from big gains and invest in things that are going to give the next big gains. ( I am long XLF via call options and puts and long XLE via call options and puts. )
  • Small / Mid-Cap stocks are poised for huge gains. Just take a look at the Russel 2k (IWM) performance in the last week. It’s 52 week high was about $177, it is still trading at a significant “discount” to these highs. (I am long IWM shares)
  • Compare IWM Performance to SP500 last week. 4.3% gain, vs 1.7% for S&P. If it weren’t for the insane run in APPL this would be a wider gap. IWM tends to be much more volatile than the S&P, we could see some big gains here very quickly.

  • And for extra points look at the various sector performance within the SP500 last week. I’m sure one of you autists can figure out how to put those various ETFs on a chart.

tldr; SPY trades sideways; with profit taking in tech causing money flow into financials, energy, consumer staples (minus amazon). Small/mid-caps start getting some of this profit taking and new money as well, IWM goes up.


Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.


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