Replies to post #5 on Wax on Wax off Paint the Fence (WAX)

[Vendit]

Comparative % ^-v performance chart over the past 18 months under main $COMPX chart.

http://angelfire.lycos.com/geek/VenditsCharts

Sector rotation:

Analysis Techniques
(stockcharts.com)

The Market Carpet tool can be used in several different ways to give you different perspectives on the market and on individual stocks. In this section, we'll cover a couple of the common techniques. The tool is very flexible however and it wouldn't surprise us if you are able to come up with some interesting analysis variations on your own. If you do, please let us know!

Scanning for Stocks to Buy or Short:

If you are a trader who is looking for good long or short opportunities in the market right now, try using the carpet either in Absolute mode or in Change mode with fairly short time durations. The S&P Sector Carpet will show you current large-cap possibilities while the Major Averages carpet will show you High-Tech and Blue Chip possibilities. Review the second paragraph for each of the indicators in the previous section for the kind of signals you will get from each indicator. My personal favorite is the Bollinger Band position in Absolute mode, but each indicator is worth investigating.

Sector Rotation Analysis:

Sector Rotation looks for linkages between different groups of stocks based on underlying economic relationships and cycles. In the past, people have tried using sector-oriented indices or funds to represent the performance of each sector as a whole. The problem of course is that each sector index hides what is actually happening with each of the stocks that make up that index. One very weak stock may cause the index to decline even though all of the other stocks in the sector are healthy. Our S&P Sector Market Carpet helps you avoid that problem by showing you all of the components that make up each S&P Sector index. By looking at the carpet as a whole, you can get a better sense of the true strength or weakness of each sector.

Here are the steps I follow to spot sector rotation using the Carpet tool:

(takes a minute to load the first time)
http://stockcharts.com/charts/carpet.html

1-Pull up the S&P Sector Market Carpet. When it appears, it will be in Price Performance mode. Click on the color scale to use the longer-term scale (+15%/-15%) and then stretch the left side of the date slider to the left until the slider says '6 days' (one week).

2-Now move your mouse over the center of the date slider then press and hold down the mouse button. With the mouse button still pressed, move the mouse left and right.
Watch for areas of green and red to move about the chart within the sector groups.

3-Because we are in 'square mode', each stock is weighted equally within the carpet. While this is what I prefer, I sometimes switch to 'market cap mode' (by right-clicking and using the popup menu) and see if that changes what I'm seeing.

4-After noting any potential rotation effects based on Price Performance, I switch to the 'Up Days-Down Days' indicator and repeat the process. Does this indicator confirm the effects I saw before?

5-Finally, I switch to the RSI indicator in Absolute mode. Again, as I move the slider back and forth, do I still see the same rotation effects occuring?


Reid