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Bear Market, Bull Market, or Sector Rotation? KNOW THE ROTATION! What Is Sector Rotation? Investors are always looking for opportunities to boost returns and reduce risk in their portfolios. One way to do this is by understanding and utilizing sector rotation. In simple terms, sector rotation is the process of moving money from one sector to another. In order to take advantage of positive market trends investors will want to pay close attention to these rotations. In general, there are two types of market conditions that investors need to be aware of: bull markets and bear markets. Sector rotation is a strategy that investors use to take advantage of these market conditions. The idea is to rotate your investments into sectors that are doing well in the current market conditions and away from sectors that are not. For example, in a historical bull market, you would want to be invested in sectors such as technology and healthcare. In a bear market, you would want to be invested in sectors such as utilities and consumer staples. Sector rotation can be a helpful tool for investors to boost returns and reduce risk. However, it’s important to understand how it works before implementing it in your own portfolio. Keep reading to learn more about sector rotation and some current YTD chart examples of what it looks like. Lets start with a philosophical question in regards to the market; is there really such thing as a bull and bear market? One could argue that there is not, and the market is in fact a cycle of sector rotations. Liquidity going out one, to another, again and again. Take for example the 4 tickers of the main post image MSFT , NASDAQ:TSLA , NASDAQ:GOOGL , NASDAQ:AAPL - these are considered Tech Stocks (yes TSLA is a tech stock!). YTD performance of all these stocks are in the red. Please take the time and study their trends. To the novice that had a portfolio made up of 80% tech, they would look at this chart and scream BEAR MARKET. But is it? It is impossible for the average trader to tell, but not all that money was "lost" in a bear market. It simply was rotated to defensive sectors. Sure, some money was taken out of the overall system I am sure but logic dictates that the majority of the money just found a new home. Investors in tech in these cases could ride the storm and average down (dollar cost averaging), write call options, or purchase puts (along with many other strats) - aka play a bear market in THAT sector. The terms "bull" and "bear" market are used to describe market conditions where prices are either rising or falling. Some people believe that there is a fundamental difference between the two types of markets, while others believe that they are simply two sides of the same coin. Ultimately, there is no right or wrong answer, and it is up to each individual to decide what they believe. So where did the Tech money rotate to? For those of you that need only bull markets to trade, find the rotation and follow it. Never marry a stock or sector - money moves fast and is prone to jumping ship when major events happen. Here are 3 charts that show areas that bulls have had success: EX1: Staples and Consumer; NYSE:HSY , NYSE:MCD , NASDAQ:OLLI , NYSE:WMT EX2: Energy, Industrial, Insurance; NYSE:KMI , NYSE:CAT , NYSE:OXY , NYSE:ABBV EX3: Defensive and Insurance; NASDAQ:HON , NYSE:RTX , NYSE:AFL , NYSE:CI If you take the time and study the charts above you will see that not all is bearish when you know where to look. Looking at these rotations can start to paint a larger picture when studying ETFs or the overall market in a national/global economy. Especially when it comes to finding a fair value area in the middle of a downed market. Recovery off of a bear market should be equitable across multiple sectors. In the current case (today) we see that the rotation into "defensive" stocks (all the stocks mention in EX1, EX2, and EX3). As there is a small pinch of hope that inflation could be slowing, the moves have been liquidity into these defensive sectors - not a sign of a healthy recovery (yet) in my opinion. Right now we are seeing more institutional interest in companies like HSY, MRK, CI, HON and less interest in Energy. Energy is a great sector to look at currently to start to see that shift. We can look at commodities like GOLD and see the increased attention and bullish run it has had recently. Remember, intuitions want to create the largest positions they can , but over time so as not to raise a flag to others. To find sector rotation: 1) Familiarize yourself with the S&P sector funds like the AMEX:XLF , AMEX:XLP , AMEX:XLE , AMEX:XLU , etc START LARGE - look at the Monthly, Weekly, and Daily 2) Scan for stocks with rapid price drops and identify sectors that may be hurting 3) Scan for stocks with rapid rising price WITH higher than average volume (preferable increasing volume as well) 4) Visualize the sectors in a heatmap. Size by Volume (Monthly) and Color by Performance (Monthly). Since this is constantly changing, I suggest taking a screen shot of this map every week - this will be the best way to "see" the money rotate. 5) When going through 2-4 consider comparing small and large cap companies as well - as this too can hold its own rotation. 6) Stay on top of news, read read read read. Understand the world around you and rely on change. 7) Utilize Smart Money Concepts. Please visit LUX ALGO's page for this, as he has made a beautiful indicator and strategy based around SMI and institutional order blocks. 8) Conduct an RSI or Stochastic RSI study to identify divergences in OVERBOUGHT or OVERSOLD conditions. 9) VIX VIX VIX - yes we are talking sector rotation and the VIX is an "overall" reflection of the market in whole but looking at areas of the VIX (ie 20 and 45) can give signs of upcoming rotation. Although it may not point where, it may describe when these rotations can occur. If you like this post and would like a more detailed follow up, please comment below so I can see your interest. This is a very extensive topic in which it may take several posts to fully write out in detail. This is post 1 and meant to be an introduction, as I know that almost every line below can be heavily expanded upon. Happy trading everyone!
NASDAQ:MSFT
by OccamsPhazer
Technology Sector May Face A Rally SoonHello traders and investors, today we will talk about two technology stocks GOOGLE and META (Fcebook), which can be finishing final 5th wave from Elliott wave perspective. As you can see, technology sector suffered the most in the last year, but what is interesting is that both GOOGLE and META can be now finishing a five-wave cycle from the highs. In Elliott wave theory, after every five waves, a three-wave A-B-C correction follows. We have just noticed some big gaps down due to earnings miss, but considering that Google and Meta are trading in 5th wave with a potential spike before a reversal, there's a high probability for an A-B-C rally soon. A-B-C recovery will ideally show up now at the end of 2022 or at the beginning of 2023. All the best!
NASDAQ:METALong
by ew-forecast
2
ENEL (1W) Pottential reversal for Enel during winter ? Hello Folks, Seems like Energy Sector is attractive right now. Looking at many European companies (Producers and Electricity Suppliers) could reveal interesting bets for mid-term // or several months during Winter. ENEL is one of Such companies. Need to dig deeper into Fundamentals. BUT for now considering Technical Analysis of Chart. Seems like Stock is down 50% from last year top. A) If it Holds price around 4.5 and turn up. It could be last impulsive wave UP (Wave 5 of bigger TimeFrame). Which could last 6-12 months. = Back to Price around 9. Right now the stock can be Attractive with Forward Dividend at 7,71%. P/E at 16 is probably too expensive (Compared to CEZ at 11.7, which should be way better company) B) If it drops below, it means Overlaping of waves marked as 1 and 4. (Forbidden in Elliot Wave theory. So it would be completely different structure and its better to stay away. It could drop to the bottom of GREEN long-term channel at 3.5 or even deeper. For now I Will not enter position, but will dig deeper into fundamentals and certainly let you know very soon. Let me know if somebody follow this company or other European Energy companies ;)
MIL:ENEL
by Longevity_Contrarian
NIFTY WILL CROSS 18000!!nifty is at a very crucial movement. till 16th sept, nifty will cross 18000 target. and till that time nasdaq, dow jones and s&p will also complete the 3rd wave of bull run(i will provide the link below of the same). after that a small correction(4th wave), and then the finally wave which will make the nifty to reach its highest point all time, and based on the trendline(the highest part of trendline). the 5th wave will happen such because sectors like IT, METAL and PHARMA, will start recovering and will give nifty a bull run, which will cause nifty 50 to go up. and according to market caps, large caps and blue chips almost gave there bull run, now its the time for small and mid caps. i have drawn waves till end of this month
NSE:NIFTYLong
by raghavchoudhary2016
XLB materials broke 78, the 2021 support; 70 or 57 may be nextThe worst may not be over. A 8% inflation is very hard to fight even with monetary & fiscal policy because the FED could only control the demand side & not the supply side of inflation. With the FED making it very clear that it wont stop until inflation comes down, we may be seeing aggressive rate hikes leading to layoffs & demand destruction in the near future & in turn causing a decline in manufacturing & materials. XLB just lost the 78 (Fib 0.236) impt support since 2021. The next stop to watch very carefully is the Fib 0.383 pivot zone @70. This may come sometime in late August or early September 2022. Make-or-break zone: if 70 fails, then 64 (Fib 0.50) will offer not much support till 57 which is the pre-pandemic zone. This scenario will end the ABC correction sometime in November or in the last Quarter of 2022. Not trading advice.
AMEX:XLBShort
by xtremerider8
Be ready for BBBIIIIIGGGGGGGG TTTARRGETBe ready for big target in Maruti Eliot wave analysis is done. If we consider the 2nd wave is completed then be ready for 3rd wave which is the longest in wave analysis. Be ready for big target in Maruti Eliot wave analysis is done. If we consider the 2nd wave is completed then be ready for 3rd wave which is the longest in wave analysis. Be ready for big target in Maruti Eliot wave analysis is done. If we consider the 2nd wave is completed then be ready for 3rd wave which is the longest in wave analysis. Be ready for big target in Maruti Eliot wave analysis is done. If we consider the 2nd wave is completed then be ready for 3rd wave which is the longest in wave analysis. Be ready for big target in Maruti Eliot wave analysis is done. If we consider the 2nd wave is completed then be ready for 3rd wave which is the longest in wave analysis. Be ready for big target in Maruti Eliot wave analysis is done. If we consider the 2nd wave is completed then be ready for 3rd wave which is the longest in wave analysis.
NSE:MARUTILong
by Hardikjethwa
REITs looking bearish across the sector. H&S setups galoreFirst noticed this when I was scouting $ABR as a potential candidate for puts. I was looking for H&S setups, and liked the look of it. If you look at $ABR chart (daily or weekly) I imagine you'll see what I mean. Looks like we're peeling off the 20MA on the 1D to the downside. (Earnings are tomorrow, as a heads up) But yes, this led me to look at other names in the sector to try and add to my overall conviction. And I found that while some have already made their move to the downside - I also found a bunch of tickers that seem like they're on the cusp of breaking down Apart from $ABR the other names I'm looking at for moves toward downside in the sector are $O and $UDR . $O especially. In terms of more of a 'macro' view this year I think with increasing interest rates, inflation through the roof etc. I think real estate sector is going to feel some notable pain this year. But of course, theories only mean so much, let's just focus on the chart setups as/when they come. For now, the sector looks bearish The options I'm personally trading currently are: $ABR Mar 18th '22 $17.5p (cost basis 2.51) and $O Mar 18th '22 $67.5p (cost basis 2.05) Posting this moreso to draw attention to the sector in general, rather than my exact personal plays necessarily. Hence using $SCHH as the image for this 'idea' so people can see the sector overall. Note the rejection/inability to breach the 20MA on the weekly. I think this thing could sag and fold over. Hope this is helpful to some! And as always, please let me know your thoughts/comments if you have any! I'm always open to new ideas, viewpoints and constructive criticism etc.
AMEX:SCHHShort
by llbtrader5
1
AAPL: Next few months in my uneducated opinionI have had the blue lines drawn out since around April or so, and I have now gained to confidence to showcase my work. I believe very soon AAPL, and many other stocks, will be hit with some bearish sentiment (whether around anti-trust or inflation, I do not know). This is my idea for what will happen: -Short term AAPL will hover around the red circle and follow the green line I drew. -AAPL will hit a new ATH (around the EOY rally). -AAPL will then trickle off down a bearish slope to find a new support, below any of the levels we have seen this past year. Hopefully stonks only go up, but this is my bearish outlook on the tech powerhouse known as Apple.
NASDAQ:AAPLShort
by blewis08
URANIUM might disappointAt the risk of sounding like a bear I think we have come too far, which is why we have seen the sharp pullback of late, I regret that I didn't catch this bearish divergence as it was emerging but my focus was elsewhere... Let's imagine we have completed the first five waves from the 2020 bottom. That means that we are overdue a pullback that retraces a good proportion of the first wave. I believe in Uranium and CCJ and am waiting for a better position, but for now, I'm not a buyer at the 200 day MA. I'll layer into names like PDN and AGE etc. as we approach the 0.5 retracement, but there may be more pain if we get a wider market pullback in future. Hoping I'm wrong for the uranium bulls out there but I'm gonna stay conservative for now, good luck friends!
NYSE:CCJLong
by ptero1492
2
VSSL LongCurrently, Demand in Metal Sector increased due to China extend its customs duty. In the last year 2020 due to Lockdown, many businesses were stuck. VSSL is trading at an all-time high level. Recently gave the breakout @279. One can Hold the VSSL stock in his portfolio above 279 for the Target 340-370. If it sustains above 340 then soon will see 400-500 Levels too. Our Bullish View will be negated if it is closed below 229 on a daily basis. Disclaimer: This post is for educational purposes. We are not responsible for any profit or negative occurred by you.
NSE:VSSLLong
by gunjeshkumar995
MARUTI - TRENDLINE SUPPORT to BREAKOUT with RISK:REWARD=1:10MARUTI Looks overall bullish and following the trendline perfectly. MARUTI is holding the above trendline from May 2021. Today, it retouched the trendline and bounced back hard. Above 7350, It can reach to 7650 quickly and easily. The risk level is 7150. One can enter the trade today at 7190 with Target= 7650 and Stop Loss= 7150 for almost 400 points with risk of 40 points. Risk/Reward ratio = 1:10 i.e., If you can risk one lakh rupees, there is high chance you may get 10 lakh rupees. My personal Trade: Entered MARUTI JUL 7400 calls at 27.00 For safe traders, MARUTI AUG 7400 calls as swing trade. DISCLAIMER: ALL POSTS ARE EDUCATIONAL PURPOSES.WE ARE NOT RESPONSIBLE FOR UR PROFIT/LOSS
NSE:MARUTILong
by sainathsetti96