Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Prices, 4th Edition

CHAPTER 8

Sector Rotation Tools

Sector Analysis with Bullish Percent Indexes

The same Bullish Percent concept that is applied to the New York Stock Exchange (NYSE), over-the-counter (OTC), mutual fund, and international markets can be applied to sectors within the market. In fact, on our web site we have created Bullish Percent indexes for every viable stock exchange in the world from Malaysia to Portugal. This application expands our ability to view the market as a whole as well as all of the individual pieces. The puzzle is the whole market, which is then broken down into individual puzzle pieces or sectors. Evaluating the individual pieces allows us to gain a sense of where each piece fits into the overall puzzle. Sector analysis is probably the most important consideration when investing. Sectors are like the schools of fish you might have seen on the Discovery Channel. These schools of fish dart quickly in one direction or the other, but what is amazing is how a whole school of fish moves perfectly together on each turn, as if some sixth sense tells each individual fish what the group is about to do. Sector rotation tends to behave the same way. Economic stimuli that would have an effect on a particular sector tend to have an effect on all the stocks underlying the sector, causing them to move in unison. Sector analysis is one of the most important yet least analyzed parts ...