Sector Investing

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Don, the first and most important indicator of market direction is found in the strength of any directional move as measured by volume and market breadth.

Since this most recent rally began there have been three distribution days.

Despite the relatively high volume accumulation lately the number of issues advancing/declining has been weaker than what I would like to see for this rally to be successful at achieving new highs for the market.

I use the VIX as a contrarian signal. Too low is a sell signal instead of a buy signal. However the market and SOX move opposite of the invex so as long as the VIX is falling our favorite stocks can rise.

Unfortunately the VIX/VXO is too close to a 10% reversal to be seen as a positive for the market. As you know when the VIX/VXO declines the market and SOX generally advance but a reversal is likely to happen early this week.

Also if you look over Les Horowitz's data you will see he has the Semiconductors he follows very close to a 100 in trend score at 92. The trend usually changes shortly after reaching 100:

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=20058322

Finally I ask you to look closely at the Sector Performance charts here and note that the market is moving closer to a market top according to the economic cycle (page down):

http://stockcharts.com/charts/performance/SPSectors.html

RtS