Sector Rotation Special Report

Sector rotation is the lifeblood of any bull market, and we don’t expect things to be any different this time around.

After a prolonged period without progress, small caps are back in the driver's seat. The Russell 2000 just capped off a bearish-to-bullish trend reversal with a decisive resolution.

At the same time, the profit-taking in mega-cap growth stocks has been non-stop these past two weeks.

The chart below shows the Russell 2000 printing its best 5-day streak of outperformance relative to the Technology Sector… in history:

We call these kinds of moves "initiation thrusts" because it is common for them to occur at inflection points, or the beginning of new trends.

In the case of the above, this extreme reading is telling us that small caps are ready to make a turn versus big tech.

Also notice where all of this is taking place. The extreme momentum in favor of small-caps is happening at the exact level where this ratio bottomed almost 25 years ago… which is the same time and place when tech stocks peaked out and rolled over during the dot-com bust.

To be clear, we are NOT calling for a top in the growth stock rally.

We don’t want to throw away our early-cycle leaders and tech darlings. They should keep working in a market where breadth is expanding the way it has been.

However, I do think we want to prepare for an environment where these stocks are no longer the leaders.

Let’s continue to feed the ducks at targets, tighten our stops to protect our gains, and then take that money and use it to increase our exposure to small and medium sized stocks.

Now let’s jump in and discuss some of our favorite candidates for fresh long positions.