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SPDR sector rotation stradegy... by Jrich

Discussion in 'Trade Journals' started by Jrich, Aug 25, 2017.

  1. Jrich

    Jrich Well-Known Member

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    Its a well known fact that the S&P 500 is the benchmark for American equity markets and the bar set for most American investment firms.... Its also widely known that 80-90% of investment firms fail to outperform this benchmark

    But there is a strategy that enables simple folk like you and me to beat the market... Enter sector rotation

    Its beauty lies in its simplicity... In essence, this strategy tracks the S&P 500 but cuts out the fat... By holding only the top performing sectors and dropping the laggers, you can potentially outperform the market by 2% or more yoy

    This article explains in further detail

    https://seekingalpha.com/article/3173636?source=ansh

    Ive decided to utilize this strategy with my 401k plan... Ill check back here occasionally to post thoughts, actions and results...... Feel free to chime in with questions or suggestions at any time

    Thanks... Jrich
     
    #1 Jrich, Aug 25, 2017
    Last edited: Aug 25, 2017
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  2. Jrich

    Jrich Well-Known Member

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    The article calls for holding the top 5 sectors, but since my 401k is still a baby, it doesn't make sense to split it 5 ways.... So ill make selections as i go along, reorganizing monthly or quarterly as necessary

    Here are the top 4 performing sectors over the past 9 months

    XLK (blue) = Tech
    XLU (purple) = Utilities
    XLV (pink) = Health Care
    XLF (green) = Financials
    Screenshot_20170825-200953.png

    But there are also 20 sub-sector ETFs that SPDR has to offer... And one has captured my interest due to a change in political environment and recent global affairs

    XAR... Defense and Aerospace ETF, with top holdings such as BA, LMT and RTN, i feel this is a no brainer...... XAR is my first selection

    Here is XAR stacked up against the same 4 top performers

    Screenshot_20170825-201026.png
     
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  3. Jrich

    Jrich Well-Known Member

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    Update

    I decided to dump XLK (tech), i think we're all anticipating that long awaited pull back in the market, my target is 2590, only 40 points away, and i would predict tech to lead that pull back

    Im down 3% on XLU, but the quarterly dividend almost evened that out

    Up over 10% on XAR!... Makes me smile every time i peak at my watchlist :D

    9 month leader chart has changed since my last posting... XLF and XLU have dropped off.. XLB (basic materials) is neck and neck with XLI (industrials... not shown)

    And ive added XAR just because i like looking at it;)

    Screenshot_20171006-133203.png
     
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  4. Jrich

    Jrich Well-Known Member

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    Well looks like i missed my shot at adding to my utilities position..... i tried to call the bottom, had a bid sitting @ $52.50 for a few weeks now.. i was off by 7 cents

    Win win i guess... who complains about their stock going up?

    Screenshot_20171010-150014.png
     
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  5. B Russ

    B Russ Active Member

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    Do the ones holding shorts on said stock, count?:D thats a shame missing by such a narrow margin though.
     
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  6. Jrich

    Jrich Well-Known Member

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    Shorties and put buyers definitely count ;)

    I moved that bid up to $53.50.. Long top wick on todays bar, might get another bounce lower coming up
     
  7. Jrich

    Jrich Well-Known Member

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    Sweet!... now that I'm on Tradingview, I can track all 9 of the sectors instead of just the top 4.... so heres 2017 in a snap shot

    XAR isn't on the chart, just the main sectors, but I'm still holding, double my original position and up about 15%.... XLU (purple) is dragging me down, so I'm looking to rotate into XLF (green) early in the new year

    spdr dec 17.png
     
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  8. Jrich

    Jrich Well-Known Member

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    Rotation completed... ive dumped my utilities position at about a 2.5% loss factoring in dividends

    That capital was split between new positions in XLF and XLE

    Energy (XLE) being a roll of the dice, the sector is still lagging on the 2 year chart, but is now a leader on the 6 month, and i forsee a big year ahead..... Financials (XLF) have fallen off the 6 month chart in favor of materials (XLB), but im already up 1% in 2 days there

    Btw, still heavily weighted in XAR..... that one you'll have to pry from my cold dead hands!


    Screenshot_20180105-200338.jpg
     
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  9. Onepoint272

    Onepoint272 Well-Known Member

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    XAR has been powerful. I let ARNC go a little too early and hoping for a pull back soon. Here are the top 10 holdings of XAR by weight:

    upload_2018-1-13_22-42-14.png
     
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  10. Onepoint272

    Onepoint272 Well-Known Member

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    BA appears to be the top performer over the last year in that XAR-holdings list....but....I show a P&F target of $356 and it is now at $336....only about 6% to go higher. May want to keep an eye on that....BA may become a drag on the sector.

    Also, the last and highest stepping stone objective I have on LMT (also in the XAR) is $348. It is currently at $336; only 3.5% to go.

    As for the banksters, the last I looked, BAC is the leader in the XLF and BAC has only 6% to perhaps as much as 15% to go higher.

    The bottom line is that money may start to rotate out of the XAR and XLF sectors in a few weeks but for the short term they look real good.
     
    #10 Onepoint272, Jan 14, 2018 at 12:36 AM
    Last edited: Jan 14, 2018 at 2:40 AM
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  11. Jrich

    Jrich Well-Known Member

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    XAR does look to be topped out at the moment, already over run the higher $85.50 target... nothing a little more consolidation cant fix

    while XLE has a few points to run to reach an $81 target... looking to up my position on payday... while trying to keep about 15% in cash, for BTFD (worked out well last year)

    XAR jan 14.png xle jan 12.png
     
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  12. Onepoint272

    Onepoint272 Well-Known Member

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    Nice work @Jrich. I was looking at XLE components CVX and OXY and they are at or very near their price objectives. Your work confirms my suspicions about energy. Perhaps the broad market is due for correction in the coming weeks...maybe then we can get a better picture of what is setting up for new leadership.

    Great thread, keep up the good work.
     
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