Sector Investing

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I think first and foremost I need to admit that there is a strong probability that the selling that led to the October bottom was a mere hiccup for our market that could subsequently lead to even higher highs off the March 2009 bottom. Election year cycles and the desire to support the fledgling job recovery while the FED chief hopes to keep his job may lead to a continuation of the rally with QE3 in the works if there is any slippage:



This chart both supports the view that the rally from the March 2009 bottom is ongoing and eventually at risk of another perhaps even larger sell off. Note that the drop to 77 on the BPNDX on Friday leaves us with a lower high of 80 on the BPNDX at this stage. At the bottom of the chart the number of stocks above their 200 day sma's could expand significantly from here and still print lower highs. There could be quite a bit more rally ahead of us but this bull run (within a bear) is getting longer in the tooth instead of actually being the beginning of a new Bull Market in my humble opinion.



I thought that last week for instance would be a down week but I for one admit I was wrong. It's okay though for me since I do have some long positions benefiting despite my KLIC short position being a definite mistake.

So when would the market logically be hit with some profit taking if it does not happen next week? The latest I would expect would be after CSCO reports on Feb 8th. The CSCO report is typically the last meaningful large cap tech to report every earnings season. Selling almost always happens post CSCO in the absence of additional earnings news to continue to support the market.

JMHO< RtS