Rotation works but......

First of all, a quick word about the market status. While there has been a lot of sharp moves during this week, the market has basically not done much and is still hanging around the important inflection point around $3900ish for S&P. Although the price action is not utterly bearish on the surface, the market is struggling at the top, failing to break out decisively even after a couple of new highs this week. I still keep my overall bearish bias for the next few weeks until I see an emphatic breakthrough to the upside! In the meantime, I'm doing long and short trading depending on the sentiment at the time. Quite often these days, I'm holding both long and short positions for SPY at its two extremes and overall it works out quite well for me😏 To be clear, my trading is generally in terms of a few days or a week or so, not in months. It is challenging to bet for anything a bit longer these days🤔

Since my call "Rotation has started!" back in Nov last year, both oil and financials have indeed mounted a fantastic rebound💪 while high-flying tech stocks have been struggling dearly lately. This is truly a textbook rotation! All of a sudden the once extremely pessimistic sentiment towards energy and financials has totally shifted to extremely bullish. Looking at the Bullish Percent Index (BPI) for both sectors, they are approaching or already reached the max reading at 100. In other words, people are universally bullish on energy and financials and their mood cannot be better at the moment. Unfortunately this is a good contrary indicator, often preceding an upcoming correction. At this level of bullishness, we often see a 15-20% correction for both sectors per their past records.  Will we see something similar this time? I bet so!