Momentum Monday – Froth Corrects Through Sector Rotation

Bull markets correct through sector rotation. This is exactly what happened last week. While many tech stocks pulled back to their rising 20 and 50-day moving averages, we saw capital rotating into other sectors – transportation, solar, medical devices, homebuilders, biotech, gold and silver miners. In other words, the money is not leaving the market; it’s merely rotating into other sectors. This is why the dips in the indexes continue to get bought ferociously.

Positive results from Moderna’s vaccine study let to a one-day hefty rally in the industries that were hit the worst by COVID – casinos, hotels, restaurants, retailers, airlines. The problem is that they never followed through. On the contrary, we saw stocks that benefit from the rising COVID cases rallying for the rest of the week – VXRT, NVAX, DVAX, QDEL, APT, etc.

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