Sector rotation

It's school holidays...games of squash and cluedo, trips to the zoo and other frivolities are the order of the day...

The volume of commentary calling for a correction (orderly or otherwise) is growing.  While on one hand it meaningless noise, it does add to a general sense of foreboding.  Longs are happy to sit on their hands, though the ripcord is never far from reach.

For mine, the Dec XJO puts I bought on this run up are still in play - on balance, I'm expecting a pullback to around the various moving averages around 4550.  I'll trade against the Mar XJO puts if we get some meaningful volatility heading into the new year.

One shape in the charts that has caught my eye are the defensives.  There is a general bid against some of these stocks that suggests that a rotation into these types of stocks could be in the offing.  That would fit with a retracement scenario where investors take profit but look to stay in the market.

Have a look at TCL for example.  It held the $4.00 level over recent weeks with rising volume and momentum divergence.  It is testing its longer term downtrend.  Think I'll look to pick some up over next week if it breaks higher (near term target $4.70)...