With just 16 trading days left for US equities this year, the ranks on trading desks are getting thinner by the day as fund managers operate with one eye on year-end fun and family time. As I discussed in last week’s ‘US stocks update,’ this can have the effect of lessened volume and a more range-bound market with lower intra-day volatility. Fewer traders and fund managers will be willing to make big bets in either direction into year-end, and this often times leads to a favorable environment for steady smaller gains, which I term as “cash-flow trades”.
The theme over the past couple of weeks has been one of continued sector/group rotation, whereby one or two major areas of the US stock market make meaningful moves higher, which in turn keeps the broader indices afloat. This is also exactly the environment where cash-flow trades flourish as defined risk/reward setups take place in clearly defined pockets in the market.
Read my full analysis here: https://www.tradingfloor.com/posts/us-stocks-using-sector-rotation-for-cash-flow-trades-2750760