sector rotation strategy

Quote from ElectricSavant:

And you heard it live on Et...

What will you folks do with this info?...take a gander at it.

Michael B.
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4 out of 5 people do not agree nor give any regard to my views. You can count on this for anything I post.

Hardly anyone will begin to consider how to use my posts along side theirs. The broadest reasons relate to the differences in what I practice and what others do. There is no connection nor any overlap.

Sector evaluation is not a trading issue per se as we see here.

Sector movement is an intermediate term consideration.

Once in a while a person brings up a real winner in ET. emk662 (I use an off the floor high quality chair myself) did this in the context of trading. igOr nails the crucial trading consideration.

At some point in the sequence the sector movement triggers price movement and it is a sustained move....

All of this precedes the talking heads and the "hot news". It precedes making the lists and the shifts in EPS and RS. for traders it is extremely important to be there ahead of the herd.

Imagine the effort it takes to be clued in on this kind of stuff.

Trend Fader said it all. It is "ridiculous". What he means is that it is totally impossible for him and 4 out of 5 people to grasp what MAKING MONEY really is.

I USE sector analysis to "be prepared". And there is that moment when a sector "takes off". If you added to your stock a day journal, a background of sector analysis and caught sector moves using intraday volume moves that precipitate early am price moves, you would have many significant results: you would make your profits in a week (and more if you had an exit strategy)and you would not have any retracements showing on your PnL. You would not be able to do dumb dollar averaging because it would not come up.

Sectors ripple out when they BO. Leaders and laggers, offset in direct proportion to their EPS and RS. You can see the current rippling by simply do the increasing volume ranking on stocktables.com (do a tight quality screen to limit the list to 100 to 200 stocks.)

All this is "ridiculous" for ET people it turns out. BUT it makes millionaires out of people who do the work. I, today, fail to understand why anyone who is a highschool grad or better, cannot equal or exceeed his salary within three years no matter how small the capital is that he starts with.

Here we also get to see the consequences of persons "blowing out" their minds as a consequence of repeated failure. Look at the Waggie/ Trend Fader non-dialogue to see one person pointing out the totally wiped out behavior of another.

Check my next post to igOr. I will point out how to watch a sector "peel out" on price following the volume breakout of an accelerating sector.
 
Quote from ig0r:

So volume of all sector stocks combined and look for strong increase along with high rate of change as a whole?
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Yes. The way to make money trading in this "kick off" is to be ready.

You can do a weekly analysis of the sectors. Intermediate term movement is the focal fractal. If you look at school of trout in a pool of water you see how it works.

The fish school. Among them there are fish who turn out to give the school a sense of action. In a small gathering within the school, some fish beging to move as a group. you see the velocity (I measure it using spread sheet that has motion indicators (FA) as criteria.) The fish are not changing size (think value (price)). They accelerate out of the school and parts of it follow. Thus the market is moving being lead by a group I call a sector.

That is the NLP of it.

To make money you set up a quote sheet to list each stock in the sector. Order it by "unusual volume" if you use qcharts. This puts "leaders" at the top.

As you watch intraday you see the cummulative volume forthe day and you compare it to 65 day average using "unusual volume".

When the volume easily passes the lowest daily volume values (DU for Dry Up), then you get to see price go green and the % net for the day goes up by 5% of more within an hour of passing through the DU volume.

As the top of the list "peels out" the others begin to follow. there is a saying "Watch the leaders and trader the laggers". It is a simple anticipatory low risk strategy.

You will see that the peel out takes up to three days. Not all will go the first day. You asked about that already because of your "market sense".

The sector move will go on for an intermediate term period. but if you are really pushing "making money" and having a steep equity curve, you will be a "trader" instead. You trade the "peel out" on the highest volatility "lagger" stocks in the sector.

For those that know I "crossover' trade based on money velocity, you can see here that this is a vital aspect of getting to making money on a "ridiculous" unbelievable money velocity level.

if you keep sector "portfolios" on stocktables.com, you will notice that they get lots of attention form the programs behindstocktables.com.

You will be exiting with profits as the talkinh heads and lists begin to note the sector. The herd will be arriving. So then you witness "waves of advances on the dialy charts. About 5 waves per 6 months.

Look at HOV from NOV 2002 onward. The channel is up. You own for the right to left traverse. Since the retrace (Trend Fader tries to trade these)falls off instead of going up, you sideline and wait for the right side of the channel to be hit and the price to take off again and again and again.

Splicing about four or five sectors into your money streams gives you a daily selection of BO stocks.

Doubling capital takes about 2 1/2 quarters. HOV does better as you see. MR Market missed that one after I suggested it to him. lol.
 
I know your right, maybe in the next journal I will incorporate this. The experiment in the Stock a Day Journal has trapped me in the method and the rules of the virtual fund do not allow me to change it. I want to follow through on it for a little bit longer to see the effect that these value plays show from this market. I am arriving at a hypothesis and will share my views after proving it.

Michael B.

The ADX journal has a tweak making my boring job more exciting. I have discovered something that I am testing. Stay tuned. Thank you for your patience and teachings Jack. I must discover these things for myself at my own pace. And I may or may not agree with you, but I am arriving slowly.


I USE sector analysis to "be prepared". And there is that moment when a sector "takes off". If you added to your stock a day journal, a background of sector analysis and caught sector moves using intraday volume moves that precipitate early am price moves, you would have many significant results: you would make your profits in a week (and more if you had an exit strategy)and you would not have any retracements showing on your PnL. You would not be able to do dumb dollar averaging because it would not come up.
 
Quote from Grob109:

Any sector moves relative to others before it's components begin they cyclical price moves in that sector.
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I would believe that the movement of components ultimately move the sector. You suggest that first the sector moves (relative to other sectors), and then the components. Or is there something I misunderstood?

In your other explanation on your method you mention volume, rate-of-change and velocity changes as values to keep an eye on. Do you have any experience/opinion on using relative strength between either components or component vs. sector index? The reason I am asking is that point&figure based sector rotation, as taught by Chartcraft or Dorsey, Wright, apply relative strength to find leaders and laggards. Any thoughts on this?

Thanks,
agrau
 
I can't seem to get off this. I am talking to the programmer to see if this can easily be done, within the framework of tickerank. I need to be able to do this after work each evening and I need an exit strategy(thinking about daily bars with a 22 period adx/+dmi/-dmi). I am working full time during the day and all my work is in the evenings. Also by using window trades, pinpoint accuracy cannot be achieved.

Michael B.

If you added to your stock a day journal, a background of sector analysis and caught sector moves using intraday volume moves that precipitate early am price moves, you would have many significant results: you would make your profits in a week (and more if you had an exit strategy)and you would not have any retracements showing on your PnL. You would not be able to do dumb dollar averaging because it would not come up.
 
Attached png is a screen-shot of a program I've written to follow sector and instrument movement based on something that follows the point&figure idea.

As can be seen, the program considers precious metals and semiconductors to be relatively oversold.

The <=> in front of each sector show the movement relative to 5 day ago. The large sum of < indicate the majority of stocks (approx. 5500 in my universe) headed south.

The next to signs behind the sector abreviation indicate whether the sector is on a buy (+) or sell signal (-) and a rising (X) or falling (O) mode. Again the high number of "-O" indicate a worsening overall picture.

I wonder how this compares to other sector followers analysis here on the board.

Grob: Could your method of ROC and/or volume be brought into a similar picture? I would love to try this and give feedback to the forum.

Best,
agrau
 

Attachments

Just found that Gummy has something on sr as well:


sector-switching-1.gif




from: http://home.golden.net/~pjponzo/sector-rotation.htm
 
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