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US Market Timing Tour:

Sector Rotations

The sector report analyses rotation in and out of sectors. We often start by reviewing a sector relative to the general market. In the 5th February report we noted the following with regards to the technology sector:

"..the P&F relative chart for the S&P 500 Information Technology (S5INFT) sector. A P&F relative chart gives a good overview of performance, eliminating much of the noise present on a bar or candle chart. This chart is quite revealing in that it shows relative trading is down to rising trendline support drawn up from the late 2008 low, a low which was very close to a trendline drawn up from 2006. So effectively the chart is at seven year trend support. Odds favor a turnaround here, with outperformance resuming. Watch for this chart to reverse up for confirmation."

We then drilled down further and then looked at rotations from other key sectors to towards technology.

"..S&P 500 Information Technology (S5INFT) is also showing rotation potential against the S&P 500 Utilities (S5UTIL) industry. A trendline drawn up from the late December 2011 low is being tested. Bounces occurred from this line in July 2012 and November 2012. A rotation to tech looks to be commencing from the utilities."

Each week we analyze the important rotations. More often than not, sector rotations provide the early signs of a market top or bottom, so they are extremely useful. The start of a defensive rotation for instance is the canary in the coal mine with regards a top.

The Weekly Review

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