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If It’s Raining in Brazil, Buy Starbucks by Navarro

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CHAPTER 6IT’S THE SECTOR, STUPID!

Michelle Carrera is a position trader who follows the macroeconomic news very closely. Over time, she has learned that both macroeconomic events and economic indicator reports can have an enormous impact on broad market trends.

Today, Michelle is betting on a breakout upward move by the markets on the basis of consistently bullish economic news over the last month. Her bet: 1000 shares of Allied Capital, a financial services sector stock, and another 1000 shares of Pacific Gas & Electric in the utilities sector.

Two months later, Michelle looks like a genius—at least with respect to the broad market trend. Both the Dow and Nasdaq are up over 10 percent. However, Michelle feels like a dummy. Her financial services ...

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