November 24, 2020, 9:48 am EST
Index Rotation In Progress
DJIA is up +300 points as of now but Nasdaq in red color. The difference is significant that index rotation is in progress for weeks or past 1-2 months.
One easy example is to compare performance of Apple (AAPL) with Boeing (BA) that represents Nasdaq and DJIA indexes. As shown in the featured image that shows AAPL (blue) was a leader in September but BA (red) reversed the trend and took over its leading position since November.
Energy, industrial, material, and financial are major components of DJIA 30 stocks performed exceptionally well since November. But tech heavy Nasdaq, AAPL, AMZN, MSFT, GOOGL, FB, TWTR suffered cash outflow. Investors turned away from these overvalued stocks to undervalued stocks.
Many DJIA and S&P 500 stocks are still in early breakout stages or still building their base so there are many stocks that offer low risk entry points like JPM, WFC. Energy stocks are too strong at this moment but may offer pullback entry points. So, focusing on rising stocks is a reasonable investment strategy for this moment.