How to Avoid Crashing as Market Rotates

NEW YORK (TheStreet) -- Think of the market as one big wheel. Sometimes it can seem like high performance tire on a high-speed sports car and other times it can seem like a giant grist mill grinding up your portfolio.

One of the tricks is to rotate along with the market as that giant wheel begins to turn. Markets are cyclical, asset classes are cyclical, sectors are cyclical, and stocks are cyclical. If you still believe in "buy and hold," then maybe this article is for you.

When the market is in full gear and your sports car is purring along, it is the risk-on stocks that are at the top of the wheel, while the inverse funds are at the very bottom of the wheel. During a time like this, you are loving life in the fast lane while those who are on the wrong side of the market are getting ground up.

Conversely, when the market begins to rotate, your sleek sports car can come to a screeching halt and start to rotate towards the bottom of the wheel, while those at the bottom begin to rotate upwards. If you do not how to recognize market rotation, you can easily give up hard-earned gains rather quickly.

If you can learn how to recognize market rotation, you can move methodically through the market, locking in hard-earned gains and moving into the areas of the market that are rotating upwards. Remember, everything is relative in the market. I track approximately 2,800 stocks and exchange trades funds, and I rank them every day based on performance and value. I try to stay within the top 200 overall. There are always a top 200 somewhere. In fact, I publish my top 200 in my newsletter each week. Click here to get four free issues.

Let me give you some examples. The market blasted off last October and peaked on April 2 of this year when the S&P 500 hit 1422.38. The market went on a real fun ride of about 30-35%. It was a great time to have your convertible top down and let the sun shine into your portfolio. I had my clients fully invested all along the way. During my 18 years as a professional money manager, I have learned that you have to make money while the sun is shining in the market.

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