A brief synopsis before I begin. In late December, it started becoming obvious that group think fortified by panic-ridden headlines had gotten the best of Wall Street, creating one of the better buying opportunities of the past decade.
By the latter half of January, the markets hit a point where bears should have been able to take control for a time. Instead, what happened was that the Fed basically went back into their cave and we learned that the economy was not running nearly as poorly as most expected. Bears quickly lost what was a key opportunity to take back what they so pridefully controlled through December.
Well into February, we are sitting in a market that is the best of all worlds:
- Fed is no longer a factor
- Economy running well, but not well enough to prompt a overly-aggressive Fed or stoke inflation fears
- Earnings estimates have been toned down substantially, allowing upside surprises galore as the year wears on
- Persistent headline fear that keeps investors completely off-balance, refusing to participate in what has been a rebound that many have missed
A perfect environment to be heavily long, in other words.
With that said, this past week a lot changed in composition of the portfolios. First, the ETFC that I initiated as a long position recently was acting suspiciously so I let it go. The KL short that was initiated towards the end of January was covered as it just refuses to break, while the gold market remains in a sea of crosscurrents.
New positions taken include AMAT, XLNX and TXN. Semiconductors have been leading the tech sector forward, while reporting impressive earnings, all things considered. The continued leadership role of the sector should accelerate as the markets move forward.
I'm expecting February to be a bullish affair, with an acceleration of the uptrend taking place this week, through the end of the month. Fortunately, last week's brief interruption of the uptrend allowed us to take advantage and position properly for what's ahead.
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