Rotation

It was just yesterday that I was responding to a member's email about the IWM (and small caps) and how it wasn't participating like say the SPX. I told the member that I see more rotation in the market now and I really do, like we haven't seen in I can't even remember how long and I also told the member  that for this move up (bounce, rally, whatever we want to call it) to continue, the small caps/IWM would have to participate. Just as yesterday the SPY was up 1.01% and the IWM +.74%, today we see that rotation and the SPY is up +.38% and the IWM double that at +.80%.

This is actually good for the move we are currently playing, but it shows a large change in character in the market, everything use to be so correlated under QE and F_E_D programs, but since QE3 was announced, that correlation has really disappeared for the first time in I can't even remember how long.

I use to feel it didn't matter too much what you bought when playing a directional move (whether a leveraged QQQ ETF or SPY), but that seems to be changing and having a little diversification should help with returns.

For instance, I added both TQQQ and FAS long, today FAS is way outperforming TQQQ even though they are both 3x leveraged, FAS is up +2.39% vs TQQQ's +.42%

When we look at short positions (assuming everything in the market keeps pointing that way), it may be wise to diversify out a bit more than usual as in this situation.