Sector Update

I posted an article about using BP indexes a couple days ago.  When the article was posted, a number of sectors were overbought, but it wasn’t a sell signal yet because they hadn’t entered a column of Os yet on the Point and Figure chart.  That situation has changed.  The Financials, Consumer Discretionary, Industrials, and Materials sectors are now all showing sell signals on the P&F charts, so anyone who is long those sectors should lighten exposure, and anyone looking to short them into a reversal has an added indicator to confirm that move.  The overall market, as represented by the S&P 500 isn’t showing a sell signal yet, but with so many sectors switching from overbought to sell signal, there is a strong possibility that this bull market rally is nearing is nearing its climax.

That being said, its important to note that the last time financials gave a BP chart sell signal, it turned out to be a head fake, and people shorting on that signal would have lost money.  Still, this signal is right far more then its wrong, and traders should keep that in mind in the coming weeks.

Picking the right sector

The vast majority of your returns are determined not by what stocks you choose to invest in, but what industries you choose to invest in.  With this in mind, one of the key things you should be doing when investing is deciding what sectors you think will do the best.  How do you do this?

Determining what sector should do well is actually a fairly simple task.  It’s all based on the observation that markets trend.  Day to day fluctuations may be fairly random and unpredictable, but the effect of those day to day fluctuations on the stock price over a period of months is generally consistent, weather it be up or down.

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Shorting Stock - The path to riches in a troubled economy

Every day, the stock market seems to continue its precipitous drop towards worthlessness, crushing hopes, dreams, and investors in a flurry of dizzying price movements. Yet there is an answer; a light in the darkness, used by the masters of investment to generate excess returns even - no, scratch that, - especially in falling markets like this one.
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