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?
- former leaders stop reacting well to good news
- relative strength starts shifting
- watching major ETF flows (see screenshot)
- leadership narrows before rotation (1-2 stocks carrying the whole theme)
- new narrative emerges + sexier story
- expansion happening 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.
Some sauce:
go to finviz make a watchlist of all the top ETFs rank by performance (week, month, Q) see where the strength has been on longer timeframes see where the strength is starting to appear on shorter timeframes
Gives you an idea on where could be rotating into…so you can focus some attention to potentially find the next leading sector.