If you are not familiar with this game, sector rotation is simply when one sector moves too high and big money starts taking their profits and moves it into another, discounted sector. This happens all the time but seems to be more obvious right now. Why? New money is not coming into the markets, the money that the world has to invest is already in the markets so it has to go somewhere. Over time it is just sloshing around between sectors.
As a short term trader or even a day trader this can mean great opportunity. You make your returns on activity so if you can follow the big money moving around then this should benefit you.
Take the retail sector for instance. Big money has been moving into this sector aggressively for the past few weeks. Now is retail suddenly making a comeback? Maybe, but more importantly is that the big money see's a discount. When money starts to move into a sector like this, the media starts to focus more on it. Not the money moving into the sector. They try and find a reason that stocks (or a sector) is moving up. While you will see on TV that Gap
To capitalize on this many traders will follow the sector rotation and trade the news as it happens. Look at the way Gap, or many other names in the space have moved. If you are a momentum trader you are happy. If you are a gap trader, you are happy. By following the sector rotation you are essentially following the news, but now you know why the news is focused where they are, and hopefully you can capitalize on it.