Quick Update

Hah! apparently my pilot readers (a.k.a. my close friends) say the blog needs more graphics. Sure, I'll come up with something soon.

Analysis:

The plan still stands. We tested 956 and breached it decisively. The next wave of earnings will have a lot of materials in them, so we might want to consolidate some of our gains in steel and alum.

I suggest doing so by selling some long term call options. Surely, I would be happy enough to lock in my stake in Nucor at $50 (current price is 44.3), knowing that I only left 25% profit on the table should the construction and car industry magically bounce back to levels before the crisis (which was the high for a good decade by the way).

So what I think will happen is the momentum carrying us toward 1020-ish still, regardless of the bad earnings from Nucor and Microsoft. That said, some sectors will win and some will lose. A common misconception is that the index rising drives individual stocks. No; the individual stocks drive the index. So the best performing stocks driving the index up to this point will eventually have to leave the spotlight for someone else as the index keeps rising. So we fight accordingly.

Sector Rotation

Take profit on basic materials (steel, alum, copper) and energy. Diversify within each sector. For example, Nucor, STLD, and X, If you have all three of them, take profit on Nucor and X and leave STLD alone for diversification's sake. STLD and Nucor uses arc furnaces, X and Bethlehem use blast.

Tech will be a mixed-bag, but generally we will be down from here after it has driven the S&P. Lower PC sale by MSFT can't mean good things for the likes of IBM, INTC, AMD (especially AMD), etc. AAPL might inch up a bit but I wouldn't buy such an overpriced stock unless I'm stuck on a desserted island with it.

Banks are the next things to run out of steam, so we watch out for them and start acting accordingly. Take profit if you hold them, short a bit of them instead to hedge. JPM and WFC look pricey right now, but we wait a few more days for the kamikaze buyers to die down a bit.

Buy some (more) home builders and commercial RE, since they are all still relatively cheap.

Buy some pharma/healthcare. Hmm, who made those swine flu vaccines again? ;)