More on Sector Rotation

I mentioned in a prior post that normal sector rotation tends to occur in the mid to late stages of a bull market and I covered the three primary drivers – the “front end” of the market will advance or decline in anticipation of changing credit conditions. The “middle” of the market will advance or decline in anticipation of changing corporate & consumer spending and the “back end” of the market will advance or decline in anticipation to the changing demand for cyclical and raw materials

As the bull ages the components within the sectors begin to splay – so in the Financial sector the banks may begin to diverge with the life co’s and in the Energy sector the oil & gas producers may diverge from the oil-field service companies. In the Materials sector we can have the base metal miners, the gold miners, the AGRA stocks and the forest stocks all with diffusing momentum studies.

Our chart displays two sector laggards that are just being discovered in there respective “hot” sectors – Shaw Communications (SJR.b - TSX Consumer Discretionary and ShawCor (SCL.a – TSX Energy). These are defensive plays just in case the market gets nasty in January. As a sub-advisor to the Union Securities "Hybrid" portfolio I acquired ShawCor and am trying to pick up Shaw Communications.

Sector Rotation

Normal sector rotation tends to occur in the mid to late stages of a bull market. This presents opportunity for investors who wish to remain fully invest throughout the bull cycle. Investors can shift in and out of the various stock sectors as they advance and decline in reaction to the business cycle. The “front end” of the market will advance or decline in anticipation of changing credit conditions. The “middle” of the market will advance or decline in anticipation of changing corporate & consumer spending and the “back end” of the market will advance or decline in anticipation to the changing demand for cyclical and raw materials

In my duties as a sub-advisor to the Union Securities "Hybrid" portfolio I directed SOME profits away from the precious metals sector and into the North American financial space. The chart displays an example of how I can keep the Hybrid portfolio fully invested in order to enjoy the current bull.

Toppy Commodities(2)?

Barrick Gold (US) NYSE $53.29 looks like a clean breakout on a daily and weekly bar chart and as noted earlier a Barrick run would be bullish for Barrick’s peers. Now whenever I have doubts about bar charts I always look at the Point & Figure (P&F) just to confirm the weekly bar chart

The good thing about the P&F is the “old” reputation along with the use of indicators restricted old fashioned 45 degree trend lines. This makes the P&F quite boring to the younger “squiggly line” technicians we see out there to-day. It is the under use of the P&F that makes it attractive to me. I see no point in looking at a daily chart with the same six squiggly lines that millions of other sheep are starring at. I clipped a P&F from Stockcharts.com to illustrate the Barrick has not yet made a clean breakout. The formant is a 3 box reversal and we can see that Barrick needs a close at or above $55 US to signal the breakout.