Sector Rotation for Future Millionaires: 21 Strategies for Experts and Beginners alike

By Tony Pow

Why you want to read this book.

* As of 5/2020, I made over 4 times using sector rotation starting the amount more than my yearly salary then.

* I have 21 strategies on sector rotation while most books have only one.

* Andrew, a columnist on the Sector Rotation at Seek

• Language: English
• Publisher: ReadersMagnet LLC
• Release date: Jun 16, 2021
• ISBN: 9781953616722

Tony Pow

"I graduated from Cal. State University at San Jose in Industrial Engineering and the University of Massachusetts in Amherst with an MS in Industrial Engineering. I have retired from a job in IT. Since then, I have read hundreds of books on investing and run thousands of simulations on investing strategies. I have been an investor for over 30 years and have written over 30 books on investing. I have written a few articles on investing for SeekingAlpha.com. ""Complete the art of investing"" is my best work. The Kindle version has about 850 pages and received a 5-star rating from all reviewers as of 1/2020. Here are my accomplishments in investing: • I made 50% in a month by using my year-end strategy. I challenge any investor with this monthly return in a diversified portfolio of 8 stocks or more. • I recommended 20 stocks in an article Amazing Return in Seeking Alpha. If you bought them on the published date, in a year you would have beaten the S&P index by over 100% without considering dividends. I made 80% in my largest taxable account in 2009 using SECTOR ROTATION."

Book preview

Sector Rotation for Future Millionaires: 21 Strategies for Experts and Beginners alike

Copyright © 2021 by Tony Pow

Published in the United States of America

ISBN Paperback: 978-1-953616-70-8

ISBN Hardback: 978-1-953616-71-5

ISBN eBook: 978-1-953616-72-2

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any way by any means, electronic, mechanical, photocopy, recording or otherwise without the prior permission of the author except as provided by USA copyright law.

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HIGHLIGHTS

Why I Believe This Book is

the Best on Sector Rotation

On 5/25/2020, I searched for Sector Rotation under Amazon’s Book. They are listed in the same order except my book Sector Rotation: 21 Strategies.

1. This book is based on.

2. From Amazon on size and prices as of 5/25/2020. From Word, my book has only 410 pages (6*9). The size of this book should be a little smaller due to the production layout by my publisher ReadersMagnet.

My book won in all categories except the price for hard copy. However, my book won as the lowest cost per page by a wide margin. In addition, as of 5/2020 I bet that no author besides me made over 4 times using sector rotation starting the amount more than his yearly salary then.

I have 21 strategies on sector rotation while most books have only one. It ranges from simple rotation of a stock ETF and cash for beginners to many advanced strategies for experts.

Andrew, a columnist on the Sector Rotation at Seeking Alpha, said, Great stuff, Tony. It’s great to meet experienced traders such as yourself. I had a browse through the book and think your method is a little more refined than mine.

Do not be fooled by past performance. Just check the recent performance of the top 50 stocks selected by IBD in the last five years. The mediocre results (hopefully it will change) could be due from too many followers and/or there is no evergreen strategy. I seldom heard the fantastic results from the followers of O’Neil, our greatest chartist. The adaptive strategy of this book shows you how to select the most profitable strategy for the current market.

I switched my annuity sector funds in April, 2000 from technology sectors to traditional sectors (better to money market funds). We can reduce losses by spotting the market plunges and the sector trends.

Most books on this topic do not consider cash or the money market fund as a sector. The average loss in the last two market plunges (2000 and 2008) is about 45%. When the market is plunging, cash is the best investment. If you can tolerate more risk, buy contra ETFs betting the market will go further down.

I have selected proven ideas from more than 100 books always with my original ideas and practical experiences.

My motivation to write this book is to share my experiences, both bad and good. I provide simple-to-follow techniques using the free (or low-cost) resources available to us. I have been successful in investing for decades. I am enjoying a comfortable financial life. If you are looking for ways to make 100% return overnight, there are many other books claiming to do so, and this book may not be for you. This book describes how to be a ‘turtle’ investor making a fortune gradually and surely. Be warned that many books were written by authors who may have never made money in the stock market.

#Filler: Silence is golden

I am glad I did not give advice to a friend who had to decide whether to take a lump sum payment or an annuity. The correction in March, 2020 would wipe out a lot of his portfolio if he took the lump sum payment. No one would share his profits when the predictions are correct, but the blame if it does not materialize.

It is same in investing that nothing is certain. With educated guesses, we should have more rights than wrongs especially in the long run.

Why You Trust Me

This book represents my years of investing experience, the hundreds of investing books I read and thousands of simulations. Hopefully this book will improve your financial health substantially as it has one to mine. I also hope that by reading this book you can become a better investor no matter if you are a beginner or a fund manager.

My children have no interest in investing, so I do not hold back anything. I expect my readers will do better financially if they can avoid my mistakes that I will point out in this book. Today and at my age I am a very conservative investor and am doing well with my investments. I wish I could have tried out many of my strategies earlier in my investing life.

I had a 50% return in one month in 2018 by using my year-end strategy. I would challenge any investor with this type of monthly return in a diversified portfolio of 8 stocks or more.

I recommended 20 stocks in an article titled Amazing Return in Seeking Alpha. If you bought them on the published date, you would have beaten the S&P500 index by more than 100% in a year without considering dividends as demonstrated in my other article A Tale of Two Portfolios.

I challenge anyone who has a better one-year performance by recommending a diversified portfolio of 15 or more stocks in any publication.

In 01/2016, I recommended to buy OIL in my posts in Seeking Alpha’s Wall Street Breakfast and my blog when oil was less than $30 per barrel. http://tonyp4idea.blogspot.com/2016/01/oil-price.html.

Recommended Apple at $55.72 (1-7 split adjusted) in April 19, 2013 as the only example in my book Scoring Stocks and I recommended selling it at $132 on 2/2015 with valid arguments described in this link. http://tonyp4idea.blogspot.com/2015/02/dump-apple.html

Why You Invest

You will need to learn about investing sooner or later in your life. You also need to take some calculated risks.

Compare the returns of the following assets: cash, CDs, treasury bills, bonds, real estate and stocks. We start with the risk-free investments and end with the riskiest. It turns out that the average returns are in the opposite order. Cash and CDs are not risk-free as inflation eats our profits. For example, the real return is negative for the 2% return in a CD and a 3% inflation rate. In addition you have to pay taxes for the ‘returns’. Our capitalist system punishes us for not taking risk. However, protect your portfolio such as using stop orders and not using leverages including options for beginners. Start being a turtle investor rather than a trader that could lose all your money.

There are two kinds of risk: blind risk and calculated risk. If you buy a stock due to a recommendation from a commentator on TV or a tip, most likely you are taking a blind risk. It would be the same in buying a house without thoroughly evaluating the house and its neighborhood. When you buy stocks with a proven strategy (i.e. when/what stocks to buy and when/what stocks to sell), you are taking a calculated risk. In the long run, stocks with calculated and educated risks are profitable.

Be a turtle investor by investing in value stocks and holding for longer time periods (a year or more). Buy and Monitor is a better approach than Buy and Hold as some could lose all the stocks’ value such as in the failure of Enron.

For experienced investors, shorting, short-term trading and covered calls would make you good profits. Simple market timing would reduce your losses during market down turns. If you buy a market ETF and use my simple market timing, you should have beaten the market by a wide margin from 2000 to 2019.

With so many fraudulent and poor managed hedge funds (but many exceptions), do not trust anyone with your investing. Do not buy investing instruments that are highly marketed such as annuity and term insurance.

If you are a handy man and do not mind to satisfy the constant requests of your tenants, buy real estate in growing areas that could be very profitable in the long run. Take advantage of the tax laws such as investing in a 401K especially the part that is matched by your company and/or a Roth IRA.

Bubbles

Bubbles have existed throughout our history. Bubbles occur due to the excessive valuation most likely driven up by the big institutional investors (fund managers, pension managers, hedge fund manager, etc.). Asset valuations are then driven even higher by the retail investors. For example in 3/2014, the market bubble was caused by the government stimulus with the injection of capital into the excessive money supply and subsidies. The first investors riding the wave made good money, and the last ones buying at the peak would lose.

From our recent history, we have the 2000 internet bubble, and then the 2007 (2008 for some) housing bubble. The chapter Spotting Big Market Plunges illustrates it was easy to detect the last two plunges. It could save us more than 25% of your portfolio in the next plunge.

Today most of the mentioned bubbles could be caused by pumping too much money into the economy by the government. However, the government cannot keep on injecting money into the economy, and ask our children to pay for our debts forever. When the injections stop, the market will drop fast and deep.

USD

As of mid-2020, the USD is doing quite well. It could be the other countries (EU and Japan) that are doing worse off than us, as Einstein said, everything is relative. The strong USD is not good for exports and the global corporations would have less profits after converting them back to USD. However, the excessive printing of money and high government debts would shake the status of USD as a reserve currency. It will also be hurt if China sells the U.S. Treasury bonds which she owns.

Bond

The bond bubble will burst when the interest rates rise. Also it will as the interest rates should have bottomed by mid-2020. It is even possible that it could go negative.

Stocks

There are several bubble stocks such as FAANGs. The market was peaking in Jan., 2020 before the virus breakout. Play defense with your stop loss orders. The record of margin debt is a big concern. When the credit is tightened with higher interest rates, this bubble will burst.

When to act

Without a time machine, no one can pin point when most of these bubbles will burst. Your market timing depends on your risk tolerance, your knowledge and your greed.

Today, we have the housing bubble (2007-2008), the gold bubble, the market bubble, the second housing bubble, the debt bubble, the bond bubble, the second market bubble, etc. It seems like we can never get out of the bubble cycle. In 2020, the world would be in a global recession if the trade war between the two largest economies continue. It would be worse for sure, if the trade war turns into a military war.

The world is economically connected better than before. When the U.S.A. sneezes, it affects our trading partners such as European countries along with China and Japan, and also their partners such as the resource-rich countries of S. America, Australia, Russia, Canada and Africa.

For me, it is safer not to try to make the last buck when the reward / risk ratio is too low. A good sleep would improve your health which is worth all the gold in the world.

#Filler: Your complaint department

Depending on your investing knowledge, the more complicated concepts are harder to understand. Some strategies even require you paper trading. It is even more complicated if you do not read this book sequentially, as this book outlines chapters for beginner, intermediate and expert investors.

Do not complain on the fillers as they just take up the blank space in the printed book and you should be glad to take a break on this lengthy book.

If you complain on my writing skill, ask yourself how many writers with English his or her first language you know write books in Chinese. There are some investment book writers who do not make a penny in the stock market. LOL.

Contents

BOOK 1

Introduction

How to Start Reading This Book

Disclaimer

Section I: Basic Sector Rotation

1 Sector Rotation in a Nutshell

2 Outline on How to Start Sector Rotation

3 Sectors

4 Subsectors (i.e. Industries) and Sector Funds

5 Selecting ETFs

6 How to Find the Current Best-Performing Sectors

7 How to Determine a Reversal

8 SMA and Volume

Section II: Leading Companies

9 Bank of America

10 Apple

11 Cisco and Huawei

12 Tesla

13 Holes in Retailing

14 Solar Industry

15 Coming Decades

BOOK 2

Strategy 1: Market Timing

1 Market Timing Example

2 Simplest Market Timing

3 Spotting a Big Market Plunge

4 Additional Hints

5 What are The ETFs to Trade

6 A Simple but Risky Strategy On Market Timing

Strategy 2: Rotation Of 4 Sectors

1 Rotate Four ETFs

Strategy 3: Rotation Of More Sectors

1 ETFs / Mutual Funds

2 Quick Analysis of ETFs

3 Sectors to be Cautious With

4 TA For Sector Rotation, Reentry & Peak

Strategy 4: Sectors In A Market Cycle

1 Market Cycle

2 Sectors According to the Business Cycle

3 Actions for Different Stages of a Market Cycle

4 Profitable Early Recovery

5 A Turnaround Strategy for Value Stocks

Strategy 5: Country Sectors

1 My Coconut Theory

2 Aging Global Population

3 The States of the United States

4 Our 4T Budget for 2020

5 Issues that Could Change the US Economy

6 EU’s Mess

Strategy 6: Asset Class

1 Market Timing by Asset Class

2 Commodities: Bottom or Mirage?

3 Housing Recovery?

Strategy 7: Market Correction

1 Correction

2 Simplest Way to Detect Correction

3 Six Signs of a Correction

4 Anticipating a Correction

5 Market Correction Example

Strategy 8: Calendar

1 Market Timing by Calendar

2 Summary

3 Year-End Strategies

4 Refined Dogs of the Dow

Strategy 9: Interest-Sensitive Sectors

1 My A.B.C. on Bonds

2 Muni Bonds

3 Money Market, CDs & Bonds

4 Dividend Stocks

5 Potential Problems

6 Dividend Growth

7 Are Dividend Stocks Better?

Strategy 10: Sector Subscription

1 Subscription Services on Sectors

2 Newsletters and Subscriptions

Strategy 11: Top-Down

1 Top-Down Investing

2 Avoid Bankrupting Companies

Strategy 12: Trade By Headlines/Earnings

1 Trading by Headlines

2 Earnings Season Overreactions

3 Strategies on Earnings

Strategy 13: Insider Trading

1 Define Insider Trading

2 How to Profit

3 Screen the Insiders’ Purchases

4 Other Considerations

5 My Trades Based on Insider Purchase Trading

Strategy 14: Momentum Investing

1 My Momentum Performance

2 Four Strategies for Momentum

3 Herd Theory

4 Rocket Stocks

5 FAANG Stocks

Strategy 15: Politics

1 Politics and Investing

2 Losers in a Trade War with China

3 Winners in a Trade War with China

4 Trade War to Military War

5 The Hawks and the Doves

Strategy 16: China

1 The Myths on China

2 One Belt, One Road

3 Shenzhen

4 Decoupling

Strategy 17: Contrary Investing

1 The Contrarian

2 Take Advantage of Experts

3 Institutional Investors

4 Short Squeeze

Strategy 18: Special Situations

1 Disasters in 2020?

2 How to prepare for disasters

3 Changes After the Pandemic

4 The List of Recommended Stocks After the Pandemic

Strategy 19: Sideways But Volatile Market

1 Short-Term Trading

Strategy 20: Sector Expert

Strategy 21: Oil And Saudi Arabia

1 The Fair Price of Oil

2 Falling Oil Price

BOOK 3

1 Technical Analysis (TA)

2 Examples of Using TA

3 Easy TA Without Charts

4 Bollinger Bands

5 MACD

6 Other TA Indicators/Patterns

7 More on Technical Analysis

8 Using Fidelity

BOOK 4

1 Simplest Way to Evaluate Stocks

2 Finviz Parameters

3 Intangibles

4 Qualitative Analysis

BOOK 5

1 Chronology of a Trade

2 Order Prices

3 Stop Loss & Flash Crash

4 Short Selling

5 Experience in Selling Short

6 Covered Calls

7 Diversification

8 High Frequency Trading (HFT)

9 Tax Avoidance

10 Trading Plan

11 Buyback, Diluting and Spinoffs

12 Brokers

13 Fidelity

BOOK 6

1 Where the Web Sites Are

2 Finviz.com Screener

3 Sectors to be Cautious With

4 Fidelity

Bonuses

1 Adaptive Stock Scoring System

2 Testing Strategies

3 More On Strategies

4 Future Trends

5 The 5G Revolution

6 Disrupting Innovation

7 Lessons from my Trading in 2019

8 Survivorship Bias and Distorting Indexes

9 Yardsticks for the Economy

10 Investing Psychology 101

11 My Gifts to You

12 Lessons from selling GME

Epilogue

Appendix 1 – All my books

Appendix 2 – Our window to the investing world

Appendix 3 – ETFs / Mutual Funds

#Filler: Your complaint department

Depending on your investing knowledge, the more complicated concepts are harder to understand. Some strategies even require you paper trading. It is even more complicated if you do not read this book sequentially, as this book outlines chapters for beginner, intermediate and expert investors.

Do not complain on the fillers as they just take up the blank space in the printed book and you should be glad to take a break on this lengthy book.

BOOK 1

SECTOR ROTATION: THE BASICS

Introduction

Sector rotation has been proven to make good profits with the least risk if it is properly implemented. However, sectors are risky, less diversified and more volatile than the market. This book describes 21 strategies from the simplest sector rotation for beginners to advanced sector rotations for experts. Most other similar books have only one strategy. As of 5/2020, my annuity account (not too many choices while working for a mutual fund company) appreciates more than 4 times using sector rotation starting with the amount more than my yearly salary then. When you correctly choose the right strategy from my 21, you should make good money. In addition, you can combine several strategies such as the year-end strategy and market timing. In the long run, this book improves your odds in making profits over traditional schemes in sector rotation by:

Market Timing. When the market is plunging, do not buy any stock including sector ETFs and sector funds. This book provides a simple chart to detect market plunges. The simplest (for beginners) is a sector rotation between SPY (an ETF that simulates the market) and cash (or an ETF of short-term bonds).

The next rotation strategy involves four ETFs in a rising market. Optionally, advance investors can include a contra ETF to time the market further. Buy the best performer from the last month of these four selected ETFs.

Some sectors perform better in different stages of a market cycle.

Many free sites describe the best sector performers such as Seeking Alpha.com and CNNfn.com.

Evaluate sectors using Technical Analysis (simple charts available free from the web) and Fundamental Analysis.

You should spend one or two hours a month to determine which sector to rotate to, or move your portfolio to cash when the market is risky. The Buy and hold strategy has not performed since 2000.

Subscription services of which there are many. Even if you subscribe to these services, you should read this book to evaluate their services and use this book as a second opinion. When your portfolio is over $100,000, $100 for a yearly subscription should pay for itself in the long run.

Use market timing by calendar and presidential cycle.

My recent experiences in sector trading can help to guide you. Be careful with many of the books on this topic that were written by professors who may never have made a buck in the stock market. When you see a lot of equations, run as fast as you can.

Some best seller books were written more than 10 years ago and do not use today’s basic tools such as technical analysis and the extensive offers of so many sector ETFs. They bear little resemblance to today’s market, which can be manipulated by institutional investors.

Most large companies today are global companies. The importance with investing in foreign companies or diversifying is less important than in the past.

When China expands, natural resource-rich countries would most likely benefit, and vice versa.

Most likely for luck but with good reasons, I predicted correctly that a disaster would happen in China as reported in August, 2019 in my article Disasters in 2020 (included in this book). The second prediction has not happened yet, but it has more impact on our economy.

The third prediction: China would not agree to pay for the damages of this pandemic and that would lead to the freezing of their debts to us (1.07T as of Dec., 2019). Eventually it could lead to a cold war or even a military war. I hope it will never happen.

Most books on sector rotation have one strategy and this book has 21 strategies. You can combine the strategies such as market timing along with last month’s best-performed sector.

I have not tested out all the strategies (as I have a life too), but they have to be proven profitable by someone at least in one market condition. We have to match the strategy or strategies to the current market. For example, the strategy should have a high chance of success if the market is trending up and the stock has high insider purchases. Consult your investing advisor before committing any money.

Besides industrial sectors, I include bonds, contra ETFs, sector mutual funds, countries, commodities, etc. Today, most sectors are covered by ETFs. For example, you do not need to buy gold coins to invest in that sector but the ETF GLD.

I included selected chapters according to your knowledge in investing for beginners, the intermediate and the advanced. Experienced investors and fund managers can skip Book 1 which includes very basic topics.

I am a retail investor similar to most of my readers. I’ve been making a comfortable living via my investment ideas which I’m sharing in this book with you.

How to use this book

Most graphs and tables are in landscape orientation (recommended for small screens) for both paperback and e-readers. Some graphs may not be displayed adequately on a small screen of an e-reader. Use PC to read the graphs on the larger screen. For better orientation, just flip your e-reader device 90 degrees if it is available. Most e-readers let you select a table or a graph to display it to fit the screen.

The font size (Ctrl Minus for browser implementation of e-readers) should be adjustable.

There are clickable links to web articles. Most of them are from my own web sites and public web sites such as Wikipedia. Some public links may not be available in the future as they are not under my control and my book may change. For security, get the information such as RSI(14) directly from the source; the primary ones are Wikipedia, Investopedia, YouTube and Fidelity.

These links extend the usefulness of this book by making available specific topics that may not be interesting to every reader. It also provides articles (most are not written by me) for more in-depth analysis.

Fidelity provides video clips to explain some of the basic terms. Fidelity does not require a balance to open an account; I have no affiliation with them except I retired from Fidelity. Take advantage of their extensive research and info. YouTube offers similar video lessons. This book provides many of the links for the paperback readers. In any case, get the same information or extra information by entering a search in Wikipedia and/or Investopedia (http://www.investopedia.com/) such as Dogs of the Dow.

‘Afterthoughts’ includes my additional comments and ideas of minor importance. There are fillers with tips, refreshing pictures (taken by me) and jokes (most original) to fill up some empty space of the printed book. Fillers, links and afterthoughts should not disrupt the flow of reading this book. So far, no one has asked me to take them out yet; many readers enjoy them and many treat them as breaks of reading this book. The layout artist of my publisher may take out many fillers and most fillers pictures.

For convenience, this book uses SPY, an Exchange Traded Fund (ETF) simulating the S&P 500, as the benchmark for the market. Annualized returns (Return * 365 / (Days between)) are used where appropriate for a more meaningful comparison. To illustrate, I had a 10% return in 6 months, a 10% in a year and a 10% in 2 years. It is more meaningful to use annualized returns of 20%, 10% and 5% respectively for the 6-month return, I use one-year return and the 2-year return in this example. Usually I do not include the dividend, so you can add an estimated 1.5% to the annualized return for SPY. In addition, compound interest is not used for easier calculation, so the actual return could be even better.

Since most of the stock recommendations are probably obsolete by the time you read about them, use them as examples and do not trade the mentioned stocks without consulting your financial advisor first. For simplicity, I treat ETN the same as ETF.

The following is for housekeeping of this book.

About the author

I graduated from Cal. State University at San Jose in Industrial Engineering and University of Mass. in Amherst with a MS in Industrial Engineering. I have retired from a job in IT and I have been an investor for over 30 years.

Dedication

To all retail investors and future retail investors including my grandchildren. I sincerely hope this book will build bridges with fellow investors with different backgrounds, as you can continue to learn about investing / trading. Also dedicated this book to all support staffs during the pandemic of 2020.

Important Notice

© 2021 Tony Pow. Emails to [e-mail].

This book is based on my other book Sector Rotation: 21 Strategies. This book is published and marketed by ReadersMagnet with a new cover design and layout. No part of this book can be reproduced in any form without the written approval of the author. Multiple copies can be ordered from ReadersMagnet. I have not paid for any product mentioned in this book. If you have a product / subscription you want me to review and possibly to be included in this book, please send it to you.

I have many requests to use this book as a college text book. Please send me your suggestions and suggested questions and homework assignment. The following link has the Question area at the end of some chapters and the students can answer the questions (if any) and do the homework. https://ebmyth.blogspot.com/2020/09/question-area-for-book-sector-rotation.html

How to Start Reading This Book

This book covers many strategies within sector rotation. Investing is multi-disciplined and there is no evergreen strategy that always works. We have to match the best strategy to the current market conditions. For example, during the year end, you want to use the year-end strategy described in this book. Even if it does not always work, it is better to use a strategy that has once worked.

RSI(14) is mentioned here as it is referred many times throughout the book. RSI(14) measures whether a stock is overbought (>65 for me) or under bought (<30). It has been repeated many times throughout the book. There are many similar terms that you might want to get more information from Investopedia.

Select a strategy and stay with it until you are ready for real money. Always use stops to reduce your losses and trailing stops (adjusted to the current prices periodically) for appreciated trades.

Glancing thru this lengthy book is time-consuming. First ask yourself what level of investing knowledge you have: beginner, intermediate or advanced. I selected a smaller number of useful articles according to your skill level. E-book readers can click the link to the selected article.

The unselected chapters are useful for reference. For example, if you are into momentum investing, read all chapters in Book 2 and Strategy 14.

Strategies categorized by ease of use

You can combine several strategies into one. Market timing should be incorporated into your strategy.

My 2020 strategy

If you pick the right strategy, it would be firework. I do combine several strategies into one: Market Timing (strategy #1) and Special Situations (strategy #18). I am more conservative and hence I invest in contra ETFs betting the market to go down. It saved me some sleep when the market plunged when the pandemic was announced. Since then, the market climbed back. As of 8/2020, I still expect the market would go down as the economy is not rosy and printing money excessively is not a long-term solution. I have been making good money in GLD and RING (an ETF for gold miners). Silver is close to my gold buys. USO, an ETF for oil, is my worst bet for the year. Do not expect all winners. If I were more conservative, I should buy contra ETFs only when the market timer signals a down turn.

Disclaimer

Do not gamble with money that you cannot afford to lose. Past performance is a guideline and is not necessarily indicative of future results. All information is believed to be accurate, but there it is not a guarantee. All the strategies including charts to detect market plunges described have no guarantee that they will make money and they may lose money. Do not trade without doing due diligence and be warned that most data may be obsolete. All my articles and the associated data are for informational and illustration purposes only. I’m not a professional investment counselor, a tax professional or any other field. Seek one before you make any investment decisions. The above mentioned also applies for all other advice such as on accounting, taxes, health and any topic mentioned in this book. Tax laws change all the time, so talk to your tax advisors before taking any action. Most of the time, I use annualized for a better comparison; 5% in a month is more than 4% in a year for example. For simplicity, most of my returns do not include commissions, exchange fees, order spread and dividends. It is the same for all the links contained in this book. Some articles may offend some one or some organization unintentionally. If I did, I’m sorry about that. I am politically and religiously neutral. I have provided my best efforts to ensure the accuracy of my articles. Data also from different sources was believed to be accurate. However, there is no guarantee that they are accurate and suitable for the current market conditions and /or your individual situations. The values of some parameters such as RSI(14) are arbitrarily set by me. My publisher and I are not liable for any damages in using this book or its contents.

Section I: Basic Sector Rotation

1      Sector Rotation in a Nutshell

How to start

I have been rotating sectors in my annuity investments for quite a long time with a sum of more than my annual salary at the time. As of 1/2020, it had increased about four times. My mutual fund employer had a lot of restrictions for me trading stocks, so rotating sector funds in my annuity was the best investment tool for me.

For a starter, I recommend that you paper trade your strategy first. Use Finviz.com, SeekingAlpha.com and/or Fidelity.com to select the best performing sector and/or use my quick analysis of ETFs. Switch it every month (or two) to the ETF corresponding to the best sector. Again, switch to cash when the market is risky. You may consider sector mutual funds which are managed, but most have restrictions such as holding periods and fees. Most if not all sector mutual funds do not have contra funds that expect the sector to go down in value. Sector mutual funds cannot be shorted.

After the basics, this book provides many features to further refine your strategy such as technical Analysis. Beginners should use Strategy 1 in Book 2. After that, start with the technical indicators such as SMA-50% and RSI(14) with a handful of sector ETFs to rotate (suggested sectors are technology, bank, health care, housing, consumer and material).

In addition, some sectors are more profitable in different phases of a market cycle. We will examine several industry sectors and country sectors in more detail. China is affecting the global economies including ours. When the interest rates are low, it would affect bonds and stocks yielding high dividends. Many books ignore market timing. It turns out to be the most important technique as the last market plunges have had an average loss of 45%!

The keys to profitable sector rotation

Sector rotation could be very profitable and less risky than most of us may expect. However, it is volatile and risky if not properly implemented. There are two ways to profit from the following:

Buy the sector when it is trending up and sell when the sector is trending down. It is the common approach to sector rotation.

Buy at the bottom or close to of a sector and sell at the peak or close to. It is hard to detect the bottom/peak.

Many investment subscriptions and free sites such as Finviz.com select favorable sectors every month. We assume the best-performing sector last month will perform better in the coming month or months. It does not always happen such as the tech sector in April, 2000 and the reversed