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Frequent Contributor

Is the rotation started?

If you look below it looks like a rotation is going on in the last 2 weeks.

I also see a good sign that VIX was over 35 last week and going down slowly.  It is usually a good sign when markets + the VIX are going down because it signals the next leg up.

sp sector.PNG

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Frequent Contributor

Re: Is the rotation started?


@FD1001 wrote:

If you look below it looks like a rotation is going on in the last 2 weeks.

I also see a good sign that VIX was over 35 last week and going down slowly.  It is usually a good sign when markets + the VIX are going down because it signals the next leg up.

sp sector.PNG


What some investors see as rotation other investors see as an opportunity to buy low.

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Participant ○○

Re: Is the rotation started?

I'm glad to see materials up b/c I have a small investment in FSDPX. But by-and-large my money is in broader indexes.

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Frequent Contributor

Re: Is the rotation started?

Seems like consumer discretionary and utilities would be a safe bet this fall.

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Frequent Contributor

Re: Is the rotation started?

Rotation would be interesting but it is not supported by action in commodities and commodity indexes. Moreover, delay in the next stimulus also means delay in rotation to cyclicals. 

YBB
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Contributor ○

Re: Is the rotation started?

YBB's post s/b the end to this thread (but I trust won't be). 

Not sure what the OP sees in the chart presented there but, no, there has been no rotation started yet as stated numerous times by (real) traders and PMs in articles and interviews throughout the week, and, as YBB stated, is not supported by the data. 

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Contributor ○

Re: Is the rotation started?

So folks are just taking profit and moving to cash

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Frequent Contributor

Re: Is the rotation started?


@FatKat wrote:

Seems like consumer discretionary and utilities would be a safe bet this fall.


Why?

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Frequent Contributor

Re: Is the rotation started?

Growth versus Value

By Colin Twiggs
September 12, 2020

First, please read the Disclaimer.

Value dramatically outperformed Growth in the aftermath of the Dotcom bubble but Growth continued to underperform until 2008. Since the GFC, Growth has outperformed Value at an ever-increasing pace. The latest, almost vertical trendline is typical of a blow-off, normally followed by a sharp reversal as in 2000.

Conclusion

We expect Value to sharply outperform Growth in the next one to two years.

==================

(link The Ratios Speak to Market Rotation

In terms of my process, I focus my macro perspective on three stages: price, breadth and sentiment. Price is most important of all, as it tells you how people are voting with their capital. Are investors buying stocks or bonds? Gold or energy stocks? Homebuilders or medical equipment names? The price charts can answer all of those questions.

I have found the relative performance to be a key market tell, in that semiconductors over time have become more of a central component to the success of the economy. Much like Charles Dow used the Dow Industrials index to track the health of the economy, I would argue that, at this point the semiconductors group may be the best broad market indication.

The ratio in today's chart turning lower tells me that a leadership rotation is occurring now. And it tells me to focus on individual price charts of the SMH, as well as names like AMD, AVGO, KLAC and others, to analyze price trends and manage potential downside risk.

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Frequent Contributor

Re: Is the rotation started?

@FD1001 : Thanks, good information.

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Contributor ○○○

Re: Is the rotation started?

Pundits have predicted a resurgance in "value" stocks for several years.
Value will outperform growth over a cycle at some point in the future.
Unfortunately, my crystal ball is very cloudy so I don't know when this will occur.

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Frequent Contributor

Re: Is the rotation started?


@rila3400 wrote:

Pundits have predicted a resurgance in "value" stocks for several years.
Value will outperform growth over a cycle at some point in the future.
Unfortunately, my crystal ball is very cloudy so I don't know when this will occur.


Nobody has a crystal ball that isn't cloudy. However, if a rotation had been ready to occur entering 2020, it's not unreasonable to think that the pandemic has created opposing forces:

  • Transition to "working from home" has created a deep need for new communication and service delivery technologies (growth ↑)
  • Pharmas and biotechs working to create a vaccine (growth ↑)
  • Restaurants, entertainment and other leisure industries hurt (value ↓)
  • Interest rates held down (banks → value ↓)
  • Transportation requirements reduced (automakers, airlines, etc. → value ↓)
  • Energy consumption down (energy companies → value ↓)

Accordingly, I shifted from value to growth in April-May (should have done that sooner, like 25 years ago) but I am still holding stocks/funds in both categories. However, LCG is my largest "box" (overwhelmingly in the case of foreign equity, and marginally in the case of US equity). I should probably move more US equity from value → growth, and might do so if the Qs descend further.

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Contributor ○○○

Re: Is the rotation started?

I do not see how technology would ever be out of favor.

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Frequent Contributor

Re: Is the rotation started?


@Gary1952 wrote:

I do not see how technology would ever be out of favor.


It is not that techs as a whole would be out of favor, but parts of tech are quite cyclical: electronics, semis, PCs/laptops, storage/disc-drives (so long as they are around), etc. Online, cloud, AI, etc are only some of the tech.

YBB
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Frequent Contributor

Re: Is the rotation started?


@yogibearbull wrote:

@Gary1952 wrote:

I do not see how technology would ever be out of favor.


It is not that techs as a whole would be out of favor, but parts of tech are quite cyclical: electronics, semis, PCs/laptops, storage/disc-drives (so long as they are around), etc. Online, cloud, AI, etc are only some of the tech.


Right - "work at home" has spurred demand for computers, cameras and other peripherals, etc.

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Contributor ○

Re: Is the rotation started?

As per barron's summary posted by YBB, some barron reporter does think that rotation into cyclicals has started.

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Frequent Contributor

Re: Is the rotation started?

I think tech went fervently high with a state of market euphoria and some inventors who regretted the March selloff, took an opportunity to regain losses ahead to likely fall market turmoil and the selloff lead to more selloff.

I think tech, as a whole will make a comeback but particularly home tech products and tech home services. 

 

 

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