Wednesday, June 13, 2012

06/13/2012 sector positions

Once the sector model selects an ETF for a long or short position, it can hold that position until it reaches parity between volume-breadth and price-strength.

What this means is that of the nine sectors, any of the best three will outperform the S&P over time, while the worst four will underperform.

The best three long positions are XLF, XLV, and XLY.

The best short positions are XLK, XLU, XLB, and XLI.

The model is currently holding a long position in XLF and a short position in XLK.

The rotation from XLU to XLK the other day, therefore, was premature.  I'll continue holding the short position in XLK, but it's important to note that positions will be held longer even on the small sector model in the future.

As for the direction of the market, the peak of real value (for the year) was the week of April 2, 2012.  The market has been on a slow and remarkably steady slide since then, with no evidence yet of panic.

To see this, go to and do a weekly chart of $SPX:UDN (that's the S&P index divided by the inverse of the dollar).  It's basically a view of how the rest of the world sees our market.

The most interesting stock I've found today on my models is SI, Siemens.  It looks to outperform the S&P by about 11% over the course of the next year.  Not stellar, but not bad either.

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