Watch for a reversal in oil stocks, details here
After
a nice couple of days the S&P 500 is right back where it started the month.
The uninformed investor may be led to believe that nothing has really happened
so far in February. On the contrary the rotation of money from January to
February has been massive. The table below illustrates what I’m talking
about.
This is the kind of rotational
action that drives trend-followers bananas. It’s also pretty typical of the
kind of vicious rotations the market has undergone over the last 2 years.
Traders must be incredibly nimble or have more than one trading technique at
their disposal in order to avoid being chopped up.
Understanding what is really
happening in the market involves more than just looking at the major indices.
Sector action needs to be examined as well. Even when the S&P 500 is flat like
this month, there are many times strong money flows occurring. By making sure
you’re aware of these flows and rotations, you can look to profit when high
probability setups occur.
January Leaders |
January Return |
February Return |
| Oils | 20.9% | -14.2% |
| Semis | 12.4% | -0.2% |
| S&P Smallcap 600 |
8.3% | -1.6% |
| S&P Midcap 400 |
5.8% | -1.7% |
| Nasdaq 100 |
4.0% | -2.2% |
January Laggards |
January Return |
February Return |
| Dow 30 Industrials |
1.4% | 1.8% |
| Retail | 1.0% | 1.6% |
Examples of areas that look to
be setting up as tradable include Oil stocks for a reversal or Retail stocks on
a breakout.
Good trading,
Rob
For those who may be
looking to expand their knowledge beyond just market timing, my
Hanna ETF Money Flow System utilizes the VIX in
generating trading signals for spread trades.
Rob Hanna is the principal of
a money management firm located in Massachusetts. He has spent the last several
years developing and refining methods for trading in stocks across multiple time
frames. He selects stocks using both fundamental and technical criteria, and
then trades them using technical analysis techniques.