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It's Market Rotation Time

Last year's darlings are out. Forget Tiffany or McDonald's or Coca-Cola. In are...well, last year's losers.

I have noted all day that last year's retail darling — luxury — is off to a slow start in 2011:

Year-to Date Performance:

Tiffany Down 3.2%

Ralph Lauren Down 3.1%+

Coach Down 2.4%

Nordstrom Down 1.7%

So far, evidence of rotation into late cycle companies is not quite evident. I mean companies tied to an improvement in employment. Office supplies companies like Office Depot and Staples are up this year, but Office Max is down.

The market seems to be saying that it is not sure where the growth will come from this year. December was fair, not great; now we are going up against tougher comps, and stocks are more expensive.

Take retail. Rather than rotate out of luxury into later cycle names like office supply companies or some apparel companies, traders seem to be showing no interest in anyone in the group.

Notice that the classic early-cycle plays in retail, like the dollar stores, or auto parts companies, are all looking a bit broken in the new year.

The feeling seems to be, to hell with trying to figure out which of the retail fish are gonna swim — I'm buying a hamster instead.

It's not just retailers. The Tiffany of restaurants, McDonald's , is being positively mauled in the new year, down 3.3 percent, the third worst performer in the Dow. And another darling of last year, Coke , is suffering a similar fate, down 4.5 percent.

Instead, the better performing stocks are in financials (AmEx , BofA ) and tech (Cisco , Hewlett-Packard ).

What do they have in common? All of these were among the worst performers in the Dow last year.

So forget about late-cycle plays. It's all about buying low, selling high.

See, rotation really does happen on Wall Street.

One sector is definitely moving on fundamentals: HMO stocks have been up big this year, especially since Deutsche Bank put out a glowing piece last week saying they will see stronger pricing trends in 2011.

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