Sector Rotations

Those of you in this business in 1994 will remember that the year was marked by a lot of sector rotation while the broad indices held up and came in basically flat for the year. In 1994, you came into the office and waited for the next sector to get hit and taken out to the woodshed. In fact, 80 percent of the stocks were down 20 percent or more at some time during the year. It�s just that those 80 percent of stocks weren�t all down 20 percent at the same time. Sector by sector, they all rotated into oversold territory at 30 percent or below on their sector bullish percent charts. Had every sector seen its low at the same time, like 1987, 1990, or 1998, then you would have gotten an NYSE Bullish Percent reading of 20 percent or lower instead of the low being 32.1 percent in December. Look at the breakdown of when sector bullish percents made their lows in 1994. You can see that it is spread across the year, but the month with the most bottoms is December. Now take a look at the 2000 Sector Bullish Percent Lows. You will find a very similar picture. Some sectors hit a low early in the year, while others are just making their low sector reading. 1994 Sector Bullish Percent Lows February Metals non-ferrous at 30 percent April Drug at 18 percent, Gaming at 10 percent, Precious metals at 26 percent, Protection and safety equipment at 32 percent, Telephone at 30 percent May Electronics at 42 percent, Finance at 26 percent, Food, beverage, and soap at 36 percent, Forest and paper products at 42 percent, Media at 36 percent Steel and iron at 26 percent June Computer at 30 percent July Health care at 34 percent September Electric utilities at 24 percent December Aerospace/airlines at 32 percent, Autos and auto parts at 30 percent, Banks at 42 percent, Buildings at 28 percent, Business products at 36 percent, Chemicals at 40 percent, Household goods at 38 percent, Leisure at 34 percent, Machinery and tools at 36 percent, Real estate at 26 percent, Restaurants at 30 percent, Retailing at 30 percent, Savings and loan at 42 percent, Gas utilities at 14 percent, Wall Street at 22 percent, Waste management at 30 percent January 1995 Oil at 32 percent February 1995 Oil service at 26 percent at 20 percent, Real estate at 28 percent, Transports non-air at 26 percent, Electric utilities at 26 percent April Biomedics/genetics at 8 percent, Computers at 14 percent, Drugs at 26 percent, Electronics at 28 percent, Health care at 28 percent, Internet at 4 percent, Media at 20 percent, Semiconductors at 6 percent, Software at 10 percent, Telephone at 12 percent, Wall Street at 28 percent May Retail at 30 percent, Steel and iron at 20 percent June Restaurants at 34 percent September Auto and auto parts at 26 percent, Europe at 12 percent October Aerospace/airlines at 22 percent, Asia/Pacific at 22 percent, Business products and services at 28 percent, Chemicals at 28 percent, Finance at 30 percent, Forest and paper products at 12 percent, Machinery and tools at 26 percent, Metals non-ferrous at 24 percent November Gaming at 40 percent, Household goods at 34 percent, Latin America at 28 percent, Leisure at 34 percent, Oil at 52 percent, Oil service at 32 percent, Precious metals at 10 percent, Protection and safety equipment at 26 percent


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