Monitoring Sectors

If we look at the IBD 197 sector list today and list the top five sector, they are:

1. Energy other
2. Mach Farm
3. Int Content
4. Med System
5. Metal Ores

Now this tells you what is moving higher currently. But what you are interested is to know six month ago what is going to move forward. That way you will be in that sector at the start of the rally.
Now if you look at the same list with the sector rank 6 month ago, here is what you get:

1. Energy other (8)
2. Mach Farm (32)
   
3. Int Content (152)
   
4. Med System (59)
   
5. Metal Ores Gold/Silver (108)

So a sector ranked 3 rd today was 152 or ranked 5 th was 108 six month ago. As a trader your objective is to capture some of that move. Once a sector reaches number one position, it is either in climax stage or about to reverse or pullback. So having that information helps only short term traders looking for quick swing trades or those contemplating shorts.

Earlier one can identify start of a sector trend better it is. That is why the approach I detailed yesterday is probably better approach. Looking at sectors making 52 week or 6 month or quarter high is another approach. If you want to use a relative strength on sectors, you should use a smaller time frame relative strength to quickly figure out sector trend change.

You will see several traders create very pretty looking, colorful spreadsheets for monitoring sectors but most of the time those pretty looking things give you perfectly useless information in terms of its usability for trading. They put enormous efforts in to it but in trading terms those efforts are wasted. One must monitor things which will make you money, everything else is waste of time and efforts.