Just a quick post to give a mid-quarter view of my main industry rotation model. The recent moves in the market have knocked many energy sector industries out of the hot zone (red), but any bounce in financials has not knocked them out of the cold zone (green). I’m still not ready to play in the depositary and credit sensitive financial companies, my insurance exposure is cheap, and earning money with low-ish risks. That said, this is the type of environment that reveals which insurers have been taking on too much risk with marginal bonds.
Remember that my industry ranks can be used in two modes: momentum mode (look at the red zone), and value mode (green zone). I spend most of my time in the green zone, looking at industries where I think pricing power will return. For me, the red zone is more useful for sale decisions. When an industry is running hot, I delay selling out in entire, and content myself with trimming positions in order to limit risk when the eventual turn happens.