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It's rotation time for beaten-up sectors

I've been away for a week, but even from afar it's been pretty obvious that the start of the fourth quarter has seen some rotation.

The two worst-performing sectors of the year — energy and materials — are the two best performers in October. Industrials, also a poor performer on the year, are up a healthy 7 percent, all outperforming the S&P's 4.9 percent gain.

S&P Sectors this month:

  • Energy: up 12 percent
  • Materials: up 11 percent
  • Industrials: up 7 percent
  • Tech: up 5 percent

The year's best performer — the defensive consumer staples sector — is lagging, but still up 4.6 percent.

Read MoreThese stocks are entering a 'sell zone': Technician

There is a certain deja vu in all this, at least for energy. This is the fourth time the energy sector has attempted to rally following efforts in December of last year, then January, March and again in August. Every rally has failed.

Importantly, I don't see anyone who is predicting this rally is based on fundamentals. Goldman Sachs was out with a long note this morning in which it concluded: "Despite the magnitude of the recent rally, we do not believe that any data releases or company announcements over the past two weeks suggest a change in commodity fundamentals."

So, for the moment, let's just leave this as an old-fashioned buy-the-losers-at-the-start-of-the-quarter rally.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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