{"id":164740,"date":"2020-02-10T19:18:57","date_gmt":"2020-02-11T00:18:57","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=164740"},"modified":"2020-02-10T19:20:52","modified_gmt":"2020-02-11T00:20:52","slug":"stock-market-sector-rotation-should-peak-within-60-days-part-ii","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/02\/stock-market-sector-rotation-should-peak-within-60-days-part-ii\/","title":{"rendered":"Stock Market Sector Rotation Should Peak Within 60+ Days \u2013 Part II"},"content":{"rendered":"
February 10, 2020<\/div>
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By TheTechnicalTraders<\/u><\/a> – <\/strong>The first part of this article<\/a><\/strong> highlighted what we believe is the start of a broad market sector rotation setup in the US and global markets.\u00a0 This second part will highlight what we believe are excellent examples of sector trade setups for our friends and followers.<\/p>\n

As China continues to pour capital into their markets to stabilize the outflow and fall of asset prices, a number of interesting components of broader sector rotation are setting up.\u00a0 First, the US stock market has rolled lower in what we are calling a \u201cfirst-tier\u201d of the \u201cwaterfall event\u201d.<\/p>\n

Additionally, Mid-Caps, Transportation, Energy, and Financials have all started to roll-over of already begun to rotate lower.\u00a0 We believe the contraction in economic activity and global market engagement as a result of the Wuhan virus will result in a much bigger and broader downside price move than many are expecting in the coming weeks.<\/p>\n

The death toll for the Coronavirus outbreak reached 910, surpassing the number that died in the 2003 SARS episode. This is causing huge issues with global supply chains and shipping companies as I talked about last week in my HoweStreet Interview<\/a><\/strong>.<\/a><\/p>\n

We believe traders need to be aware of the continued capital shift that has been taking place over the past 4+ years.\u00a0 As foreign markets struggle and the US Dollar continues to strengthen, capital has been moving into the US stock market as a protective measure.\u00a0 We believe this will continue throughout the virus event, yet we believe the US stock market will contract, move lower, as a result of this virus event as well.<\/p>\n

Many US companies are still exposed to foreign markets through overseas engagement and retail locations,\u00a0 Automakers, consumer products, manufacturing, heavy equipment and dozens of other sectors derive 5% to 25%+ of their revenues from China and other overseas markets.\u00a0 MacDonalds, Starbucks, Caterpillar and dozens of other US companies have broad exposure in China and Asia.\u00a0 We believe this virus event could last well into July and possibly much longer.\u00a0 Because of this, we believe a broader market sector rotation will take place and that volatility will continue to increase over the next 6 to 12+ months.<\/p>

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Here are the three sectors we believe have a strong potential for setting up a fantastic trade.\u00a0 Follow our research to learn more about what we do and how we can help you find incredible trade setups.<\/p>\n

Russell 2000 (IWM) \u2013 Weekly Chart<\/h3>\n

The Russell 2000 (IWM) has already started to move a bit lower over the last few weeks.\u00a0 Even though the US stock market was plowing higher throughout most of December and January, the Russell 2000 is actually showing signs of a rounded top formation with a very clear downside \u201cfirst leg\u201d (waterfall) type of price decline.\u00a0 We believe broader market contraction and sector rotation could push IWM below $144 in an attempt to target historical support near $126.<\/p>\n

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TECS Technology Sector ETF \u2013 Weekly Chart<\/h3>\n

The Technology sector may see a broader market decline over the next 30 to 60 days that could push TECS from recent lows, below $6, to levels above $12 to $16 on a reactionary move in this 3x ETF.\u00a0 TECS has experienced very low volatility over the past 3+ months while the US stock market has continued to rally in Q3 and Q4.\u00a0 Any breakdown in the global technology sector could push TECS well above recent peak levels near $18.<\/p>\n

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XLF Financial Sector ETF \u2013 Weekly Chart<\/h3>\n

The Financial Sector is very likely to experience a 3% to 10% decrease in consumer activity related to the lack of travel, outside entertainment, shopping and food services activities and could see extended risk to loans, debts, and other services as a result of a global economic market contraction.\u00a0 We believe a downside risk exists in XLF where the price will likely break below $30 and target the $25 to $26 level over the next 30 to 60+ days.\u00a0 Ultimately, XLF must hold above the December 2018 lows near $22 if the current downside rotation ends within recent price ranges.\u00a0 A move below $22 would indicate we have entered a new stage of a Bear trend.<\/p>\n

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The reality of the situation for most of us is that we are not at immediate risk of catching anything except a common cold or flu.\u00a0 As skilled traders, we must identify an opportunity where it presents itself and we must attempt to learn to capitalize on that opportunity.\u00a0 We believe these sectors, and many others, are about to present very real trading opportunities for skilled traders.<\/p>\n

The virus is expected to double in scope every 6.5 days based on modeling data.\u00a0 Obviously China and Asia are the biggest risks right now.\u00a0 Our biggest concern is that the virus spreads into India and Africa.\u00a0 We believe a spread into these regions could add hundreds of thousands or millions of infected people to the lists.\u00a0 At this point, it is far too early to tell how extended this virus event will become \u2013 yet we feel we are just starting this rotation and the true scope of it won\u2019t be known for many weeks or months.<\/p>\n

Join us in our quest to create incredible profits from these bigger trends today. As a technical analyst and trader since 1997 I have been through a few bull\/bear market cycles, I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive\/life-changing if handled properly.<\/p>\n

Join my\u00a0Swing Trading ETF Wealth Building Newsletter<\/strong>\u00a0if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.<\/p>\n

Chris Vermeulen
\nTheTechnicalTraders.com<\/u><\/a><\/strong><\/p>\n

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NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.\u00a0 It is provided for educational purposes only.\u00a0 Our research team produces these research articles to share information with our followers\/readers in an effort to try to keep you well informed.\u00a0 Visit our web site (www.thetechnicaltraders.com) to learn how to take advantage of our members-only research and trading signals.<\/em><\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By TheTechnicalTraders – The first part of this article highlighted what we believe is the start of a broad market sector rotation setup in the US and global markets.\u00a0 This second part will highlight what we believe are excellent examples of sector trade setups for our friends and followers. As China continues to pour capital […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-164740","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164740","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=164740"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164740\/revisions"}],"predecessor-version":[{"id":164743,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/164740\/revisions\/164743"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=164740"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=164740"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=164740"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}