Sector Investing

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Markets completed a fifth straight week upwards, with the Dow now rising 23 of the past 26 sessions. Despite the rally, the bourses are looking a bit tired, and overdue for a rest, if not a 2-4% pullback. The levitation continues to astound, with traders shaking their heads and shorts queezed to the max. With April now in the record books, U.S. Markets posted their best monthly performance since October 2002.

The Merger party continued, with announced takeovers sparking the "old media" sector. Murdoch's News Corp made a $5 Billion bid for Dow Jones, Thompson Financial for Reuters, and even the long rumored hook up of Microsoft for Yahoo! was in play this week.

All these elements managed to drive markets higher: The Dow gained 1.1%, and has 13,500 in spitting distance. For the first time in over 6 years, the S&P500 left 1500 behind, gaining 0.8% on the week, and is 1.4% from its all time (March 2000) highs. The Nasdaq, continued its gaining but lagging ways, up 0.6%. Also gaining but lagging: the Russell 2000 lifted 0.4% for the week.

Barron's Streetwise column notes the conflicting sentiment out there:

"Surveys that ask active pros what they think have showed steady if not extreme bullishness, and long-only fund managers are and have been "all in," with cash levels at stock funds reported last week to have fallen to a record low of 3.7%. One notable exception to this outburst of optimism: the latest Barron's Big Money poll, featured in last week's issue. The American Association of Individual Investors poll, on the other hand, dipped below 35% bulls last week, a level breached only nine times in the past 15 years -- and only once after the market posted a gain in the prior month. Clearly, the broad populace is fighting the market trend."

Fighting the trend, or absent alltogether? Trading volumes at the online brokers have been rather anemic. I suspect post 2000-03 crash, the disinterested public has been more interested in real estate and commodities. In the counter-intuitive ways of the market, that may be perversly bullish.

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