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The sector rotation model or SRM is a trading indicator described by Giorgos Siligardos in an article in the traders' magazine.
The sector rotation model is based on several sectors represented by the following exchange traded funds:
XLY: Consumer Discret Select Sector SPDR
XLF: Financial Select Sector SPDR
XLE: Energy Select Sector SPDR
XLU: Utilities Select Sector SPDR
XLP: Consumer Staples Select Sector SPDR
Because the stock market often leads the economy by few months, when energy, utilities and consumer staples stocks outperform the market, investors and portfolio managers expect a weakening economy and a bear market. When Consumer Discret and Financial stocks are outperforming the market, investors expect a market bottom followed by a bull market and a possible recovery in the economic activity.
The goal of this indicator is to provide a macro view of the economic cycle and thus help traders analyze stock indices.
To plot the sector rotation model in a chart, type the following formula: (Right click on a pane then select "Edit Formula")
a = Srm(50);
Plot(a, "SRM", colorRed, ChartBar, StyleSymbolNone);
More information about the sector rotation model can be found here:
http://www.traders.com/index.php/sac-magazine/current-contents/feature-articles/85-market-analysis/1653-applying-the-sector-rotation-model
http://www.financialsense.com/contributors/ryan-puplava/sector-rotation-tells-the-tale
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
