By: Chris Rowe — February 23, 2009
Head for the hills!
... because we're coming down hard on all you bulls!
I hope at the very least you've been hedging your bullish positions -- if you read just about any of the articles I've written over the last 3 months, then you should be.
Alright, enough gloating. Because you know what happens next (after gloating); the market rips you a new one. I'm here to tell you what to do NOW, so let's talk about sectors ...
The market, of course, can rally here (while it's definitely not the direction that odds favor) and if it does, you're going to want to know what to be bullish on. Let's cut to the chase, shall we?
Internet stocks, Healthcare and Precious metals.
These are the sectors you want to be bullish on if you must be bullish on something.
Let me stop here for a second. I want any member of my options trading service The Trend Rider to please forgive me for giving information that I typically only give to you in my market commentaries. But today, I want to focus on sectors because, in about a week and a half, we're going to launch Sector Hunter. That just made me think that my article this Tuesday should be based on the most important thing to think about when you invest in/trade the market: SECTORS.
80% of any stock's move is directly attributable to the performance of the sector that it's in. And if you're halfway savvy when it comes to investing/trading, you know each sector has an agenda of its own. So even when the market is in a strong decline, some sectors are performing well (or at least relatively well).
Let me give you a quick example.
As you can see below, from March 2007 to June 2008, while the S&P 500 lost about 5%, Energy stocks moved up 50%, and Financial stocks declined by about 37%. If you just follow the chart for about 4 months to July of 2007, you can see that the S&P 500 was up 10% (remember those days?) and the Energy sector was up 30%, while Finanicals were down slightly. So if you were focusing only on the direction of the general market, you were missing it.
Sector Hunter is about to take the world by storm, and I don't mean that in the way you hear it in some sort of marketing material. This prediction will be better than any stock or market prediction you've heard from me yet.
Nobody can argue against this with a straight face: The very best place possible to have your money is in a position on a sector that has the strongest momentum - and that momentum must be in the same long-term direction of the general stock market (in this case that means finding the sectors that are in the strongest down trend and betting that they go lower).
Some of the sectors to take bearish bets in (and bearish bets are not guaranteed, but they are generally more likely to work out at the moment) include Banks, Housing, Savings and Loan, Leisure, Real Estate and Forest Products.
This is the kind of info that Sector Hunter will bring you, only it will bring you this info the second a sector becomes hot (as an upside or downside play). You can even jump into bearish ETFs on some of these sectors RIGHT NOW and they will soften the blow to your stock portfolio if you've been one of the investors sitting, hoping, and praying that the market goes back up. If you're playing it right, you're profiting from this historic down trend.
Don't wait any longer to take bearish positions, and I'll tell you why: if you get bearish on the right sectors, then even if we're wrong about the market trading lower, these weak sectors will likely not participate, in a relatively big way, in an advancing market. And that, my friends, is a hedge in and of itself (investing based on sector relative strength).
Again, I'm making a special case for you today -- as of now, you will not get the right sectors to play each week without being a member. However, the only way to get these sector changes THE SECOND THEY CHANGE SIGNALS (along with ideas on many different ways to play them) will be with Sector Hunter. That's why I'm dedicating today's article to it.
If you pay close attention, you'll see that staying profitable is all about focusing on sector activity. And when you follow the Sector Alerts that the automated system generates, you'll start to look at the financial media like they must be smoking crack half the time they are talking. The market will become clear to you and you will be surprised at how lost people who you used to respect have actually been this whole time.
The way to win is to place upside bets on the strongest sectors, and downside bets on the weakest sectors, but place more bets in the direction of the market (right now, that's down) and some bets in the other direction as a hedge (right now, that's up).
I know you'd love for me to show you exactly how to play the strong sectors' upside and the weak sectors' downside, but I personally do that at The Trend Rider, and you'll hear about the signals, real time at Sector Hunter.
I figured I would accomplish the following in this article:
1. To remind or explain to you the most important thing to focus on when investing in ANY market: sectors.
2. Personally, put my name behind Sector hunter. Even though I'm not giving you a STOCK PICK or ETF PICK right now, I'm recommending something that can make you a lot more money. Sector Hunter will be one of the most profitable recommendations you'll ever hear from me. Remember that I'm the one who told you that today in my article and not in an advertisement.
For those of you who have been personally thanking me by way of private email for the last three months of articles on being bearish (and not believing the hype) please do me a big favor this one time: Please feel free to publicize the kudos in the comment section below. It does wonders for my confidence and if you say these great things publicly, other readers will see that we're really helping you.
This may have sounded a bit "salesy" but it's not. I don't even feel like I just wrote an article, but rather a letter to the readers I've cared about for four and a half years. Thanks Tycoons! More soon.