Sector Trend Investing use 40 different sectors made up of thousands of listed stocks to monitor the market sentiment and help choose entry and exit points.  Having a strong, fundamental and technical investment style will improve your returns. The market normally hits lows about twice a year and hits highs about twice a year.  Sector Trend Investing takes advantage of this up and down cycle to pick entry and exit points.  The 40 sectors we monitor include over 3,000 different stocks and more accurately reflexes the true market sentiment.  By following the sector sentiment, I am able to look at all the stocks in each sector to determine if that sector is trending positive "X" or trending negative "O".

I research and buy fundamentally strong stocks when the market is at or near it's the over-sold condition or B1 level, and then sell those same stocks at or near the market over--bought or s6 level.  I typically look for a 10% or better return on our stocks during each cycle.  Taking advantage of 2 cycles per year with a 10% return each cycle gives me a 21% per year investment return on my portfolio.  I am not trying to buy stocks at the absolute lows of the market, nor trying to sell at the absolute highs of the market.  I am entering the market when stocks have been washed-out in an over-sold condition.  I then sell those stocks as the market is flying-high and in an over-bought condition.  Most of these cycles exceed 10% returns on fundamentally strong stocks.  I am very cautious and work to have to have consistent returns of 10% or more per cycle.  Beware of getting too greedy (being a pig) and losing your money.

OVERBOUGHT:  When 30 or more sectors are positive (green), the market is reaching it's peak (over bought condition) and stocks with strong fundamentals are reaching their highs.  Stocks with poor fundamentals have been left behind and are seriously underperforming the market.  This is the best time to sell fundamentally strong stocks (since everyone else is buying at higher and higher prices).

OVERSOLD:  When 30 or more sectors are negative (red), the market is reaching it's bottom (over sold condition) and stocks with strong fundamentals have pulled back to more affordable (discounted) prices.  Stocks with poor fundamentals have hit new lows and will not recover for years, if ever. This is the best time to buy fundamentally stocks (since everyone else is selling them at a deep discount, over-sold condition).  Fundamentally strong companies stock price have come down because of the market, and not because of the company these stocks represent.

1.  Build a list of fundamentally strong companies to purchase from.  Do not purchase any stocks that have problems on their balance sheets or are not a fundamentally strong company.

2.  About 80% of your fundamentally strong companies will actually respond correctly for you.  The 20% that do not perform correctly are "Dogs".  Sell you dogs when the market enters N3 thru the N5 territory on the Daily Trend Chart (see Sector Trend Investing Chart for details).  Do not let any one transaction run your portfolio into the ground by taking a signification loss.  Do not reinvest the money into other stocks.

3.  I am purchasing stocks that have pulled back with the market and not because there is a problem with the company.  By purchasing stocks that are down with the market, we are confident that these stocks will rally when the market rallies.  If we can average a greater then 10% return on each market cycle, we can expect a greater then 21% return per year on our portfolio if we average 2 market cycles per year.  This should allow us to double our portfolio every 3½ years.  This investment method could turn a $10,000 investment into almost $80,000 in 10 years.

4.  Move your funds to a deep discount brokerage house.  I personally use Ameritrade and Scottrade for my funds.  Ameritrade charges me about $11 for a purchase and $11 for a sale.  This makes the "Round Trip" cost of a transaction $22.   Scottrade charges me $7 for the same purchase and $7 for a sale.  This means that I spend $14 on a "round trip" transaction.  This saves me $8 per transaction.  If I do 12 round trips a year, that saves me almost $100 per year or $1000 in 10 years.

5.  I use Point-N-Figure charts for all our technical analysis.  The best source for Point-N-Figure charts is Dorsey Wright.  Dorsey Wright is a pay service that is used by every major financial planner and almost every mutual fund manager to help them pick their investments.  If you need a free service you can use Stock Charts.  Stock Charts is very limited in the information they provide.  I have been a Dorsey Wright. subscriber for 5 years and have had steady returns for every year that I have used Dorsey Wright's charts.

6.  Fundamental research is a must to finding good stocks.  Stocks with bad fundamentals will ruin a portfolio.  I use MSN for my fundamental research.  It is quick, easy and free.  I use a 6 -step quick check to find stocks that are conservative and fundamentally sound.

B1.  Be Patient! Especially on your buys.  Waiting until the market enters the B1 (Buy) area before purchasing stocks.  Do not try to find the absolute market bottoms.  If the Sector Trend Investment Cycle hits the B1 level, the time to start purchasing your stock positions has arrived.  Take a look at your stock watch list.  Double check the fundamentals and technicals and move into the market.

B2.  Time is running out to purchase stocks at a deep discount.  Finalize all your stocks positions.  If you wait too long you will miss the best sales of deeply discounted stocks.

N3.  Sit back and watch the market climb.  Usually the market moves up quickly from the bottom into the N3 zone and then steadily continues to improve.  Show patience and give the market time.

N4.  Check your portfolio for underperforming stocks.  If you pick a stock that is not responding positively with the market getting stronger (cycle levels N3 thru N5), SELL!  Do not hesitate to get rid of your dogs.  If the whole market is moving up and you have some stocks that are lagging the market, don't let them drag your portfolio into the negative.

N5.  By now the market should be firing on all cylinders.  Again, do not hold any underperforming stocks.  If you have any stocks that are negative, liquidate them.  Check your overall position improvements.

S6.  If the Sector Trend Investment Cycle enters the S6 level, start considering selling part or all of your positions.  By now you should have than a 10% return on your good picks.  Your Dogs should be long into your past without much damage.  Exercise patience.  If you start worrying about your portfolio going do and losing any of your gains, take some of them off the table.

S7.  If the STI cycle enters the S7 level, SELL!  Do not try get greedy by trying to time the market tops.  Liquidate your stock positions.  Do not overstay the market.  If you don't sell your positions, you are risking loosing all the gains you made this cycle.  To be a pig.  Don't gamble with your portfolio.  Lock-in your gains and take a rest.

S8.  Start building that list of fundamentally strong stocks that you will be purchasing from for the next cycle.  Try to build a list of 20 to 30 stocks.  This list you will use to pick 6 to 10 fundamentally strong stocks when the market enters the B1 level.