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All we've heard for the last month or so is how the market is undergoing a tremendous rotation between sectors.
The migration of money from perceived overvalued groups into better values has changed the performance landscape, but is it worth following the crowd?
In most cases, I preach that being part of the crowd is one of the more dangerous moves.
This is because crowded trades tend to be so at their tops, not bottoms. But in a small number of cases, a few of the leading sectors are showing signs that they've yet to become crowded trades.
The following table displays the top-performing, widely traded ETFs since the beginning of July.
The sector rotation has prices in healthcare and related groups outperforming the market. These, of course, had been some of the market's underperforming sectors for some time.
Topping the list is the SPDR S&P Pharmaceutical ETF, which has left the market in the dust over the last month or so, returning more than 12%.
Normally, I would back away from a potentially overbought, crowded move like that, but let me explain why it's different in this case.
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Strikepoint Trader and contributes to Money Morning as the Quant Analysis Specialist.