Rotation people!! How to spot it: Think back to january…we witnessed a HUGE rotation from software into semiconductors.
Thinking logically…that big $$$ that rode semis to ATHs is going to eventually take profit and rotate elsewhere.
Not saying the semiconductor run is over, but software seeing some renewed strength makes me think we’re in the early stages of a short term rotation out of semis.
The question is…into where? First, how can you tell when rotation is happening?
Signs of rotation:
- Former leaders stop reacting well to good news
- Relative strength starts shifting
- Watch major ETF flows
- Leadership narrows before rotation (with 1-2 stocks carrying the whole theme)
- A new narrative emerges with a “sexier story”
- Expansion happens in a different theme
The caveat is don’t be too early to rotate out of the strong theme…wait for confirmation of weakness + lower highs.
Methodology / Sauce:
Go to finviz, create a watchlist of top ETFs, rank by performance across week/month/quarter. This shows where strength has persisted on longer timeframes and where it is starting to appear on shorter ones. The goal is identifying where capital has been and where it could be rotating into, so you can focus attention on finding the next leading sector.
Original: investingluc @ X