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.