Heinz,
As mentioned previously I have CLASS 1 SELL SIGNALs across the board and the VIX, TRIN, CANDLES(for the HiTechs) are supporting my SELL signals.
I want to put more discussion into SECTOR ROTATION. Whether or not we get a big selloff, there is still money to made if we can identify the EXTREME SECTOR ROTATION and play it accordingly in either direction.
This SECTOR ROTATION is where money is being taken out of a few sectors and moved to another sector. The strong moves in the positive sectors are followed by strong downward moves in other sectors. It could happen exactly at the same time or lag. So with the POSITIVE SECTORs play them to the upside and with the NEGATIVE SECTORs play them to the downside.
I feel that the best way to play it is that when the overall market is oversold go with the POSITIVE SECTORs and when the market is overbought play the downside with the NEGATIVE SECTORs.
I would like comments/additions to my list:
POSITIVE SECTORS:
1) DRG - at a short-term top, but should not pullback alot. The DRG just set a slightly HIGHER HIGH
2) BKX - at a short-term top. May have seen exhaustion gap, but did just set a HIGHER HIGH.
3) OSX - at a short-term top. The OSX appears to have made a successful "W" shape bottom(not exact), and just set a HIGHER HIGH. It just had its first set of a HIGHER LOW & HIGHER HIGH. Of the current POSITIVE SECTORS, the OSX may have more upside potential, since it is still near it's lows
4) XOI - similar to the OSX
5) IPO - the new offerings are still getting hot responses
NEGATIVE SECTORS:
1) DOW - at a short-term top. Its on its way to making a 3rd cycle of LOWER LOWS and LOWER HIGHs
2) SPX/OEX - at a short-term top. Its on its way to making a 3th cycle of LOWER LOWS and LOWER HIGHS
3) NAZ/NDX - at a short-term top. It just completed its 1st cycle of LOWER HIGH/LOW, assuming it does pullback from here. Since it is still closer to its all-time highs than the DOW/SPX, feel it may have greater downside from this point.
4) DOT - at a short-term top. If it starts to pullback from here, it would have failed at forming a DOUBLE TOP and would be its first LOWER HIGH since AUG. It is still early to convincingly say that it is beginning a downtrend, but the signs are there.
5)TRAN - only in the midrange, but just looks sick
6)RUT - nearing a short-term top, and one of the weaker sectors.
Regardless if there is a strong pullback or not, I think it it is important to be in the right sector for the short-term trend in order to maximize profits. For example: from AUG thru SEPT it was a mistake to be shorting the HiTECHs, but since SEPT its becoming a viable short. Guess where my short plays are right now - hope Im right, since Im loaded.
Depending on how big the selloff is, I will probably play the OSX, or the major indices to the upside.
seeya |
