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With the stock market at overbought levels, finding the right sector to put money to work becomes more important than ever. With this in mind, we look at what happened with homebuilders, and how that sector moved from an average stock market performer, to an over achieving sector.

We noticed that the bullish percent index for the homebuilder sector turned positive, in late November/early December 2011. We also observed that the percent of homebuilder companies in a positive trend also turned positive at the same time. Additionally, we noticed the percentage of companies with improving relative strength turned to X’s shortly thereafter.

While the experts were still telling investors to avoid the home building sector, in the past three months this sector rose 22%. Now these same experts are calling the bottom of the housing market and recommending investments.

This is why it can be very damaging to your portfolio (and damaging to your investment returns), if you pay too much attention to what the media is reporting.

The media — even the financial media — can often be way behind the curve. Most of Main Street investing, however follows the financial media. This is one reason why I continue to employ the use of point figure charts to manage your money. It’s important to see which sectors and which specific names are starting to see increased demand (and which other names are starting to see an increase in supply), and then move accordingly.

Using this same approach, we have begun to notice increased demand in the biotech sector.

We’ve noticed that the bullish percent index for the biotechnology sector has turned positive. We also observed the percent of biotechnology companies in a positive trend has also turned positive. Finally, we have noticed the percentage of companies in the biotech sector with improving relative strength continues to increase. This certainly helps put the biotechnology sector of the NYSE on our radar scope.

If you are relying on a blog post for specific investment advice, you are making a huge mistake. Please speak with an investment adviser before making ANY investment decisions.
If you do not have an investment adviser, we encourage you to contact Mullooly Asset Management at 732-223-9000, or through our website. Under no circumstances should the content discussed here to be considered specific investment advice.

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