Let us repeat the refrain; early morning weakness encourages bargain hunting, the shallow correction never falling far enough to allow traders to take long positions at comfortable (major support) levels, so every day the frustrated under-invested money managers chase stocks – buying them from Goldman Sachs — not because they think prices represent value, but only because prices are moving higher. As prices fail once again to follow through on the downside, the shorts are tripping over themselves to cover upside exposure, adding further fuel to the fire, and presto, a rally is born.

Thursday was déjà vu all over again; profit taking on Citigroup (C -5.0%) and Goldman (GS –1.9%) drove futures lower on the opening; however, the selling quickly abated, and buyers methodically pushed prices back into the black by the close (S&P +0.42%).

…

While volume remains tepid, momentum divergences remain plentiful, and many stocks are in distribution zones, the path of least resistance remains higher. We may not agree with the persistence of the rally or whether prices represent good value at these lofty levels, but until stocks actually begin to trace out a pattern of lower highs and lower lows, we have to let the rally run its course.

So basically , we need to stay calm but closely monitor the market. This is surely not the time for buy-and-forget-it type of the long-term investment.

Here is the link. http://caracommunity.com/report/2009-10-16

So I am kind of in the dilemma everyday whether to jump in the market or not. But I decided to hold once again. But, I will have to fight with myself not to jump in.

Here is a good reading from BillCara.com Blog.

Markets cheered the Bank of England decision and the relatively upbeat US unemployment report, bourses around the world rallying briskly, as traders concluded the worst of the recession is behind us. Regardless of your market opinion, there was plenty to support your argument.

What to like about the market:
• Since the March low the markets have been making higher highs and higher lows, the definition of an uptrend.
• Solid leadership with technology leading the initial advance, industrial and financials taking the baton, handing off to consumer discretionary.
• Impressive breadth with the advance decline line consistently registering higher highs.
• The market has done nothing wrong, Bears having fumbled the ball each time they had a chance to send the market cascading lower.
• Companies have had little trouble beating lowered expectations
• Interest rates have remained low, with fixed income securities providing little competition for investor funds.
• The government has helped banks rebuild their balance sheets, keeping borrowing costs for financial institutions very low, allowing them to make money on the interest rate spreads.
• Lots of liquidity is sloshing around the system looking for a home, some of which is finding its way into equity markets.

Reasons to expect an imminent decline:
• The rate of deterioration may be slowing, but fundamentals are not conducive to a sustainable recovery.
• Climax runs do not end well; healthy markets take two steps forward, one step back a natural rhythm re-energizing the prevailing trend over time.
• The S&P (+1.34%) has reached the .382 retracement of the Bear market, a natural place for a pullback or termination of trend.
• Put call ratios show excessive optimism, as do assorted polls of investor sentiment.
• The Bear market low of 666 was the lowest low seen for many years; an up, down up sequence is needed to prove a bottom is in. Thus far only an up leg has been recorded.
• Goldman Sachs (GS –1.88%) a leader hit a yearly high yesterday, reversed sharply, and finished extremely weak today. When early leaders fail to participate in a trend, the move is near a reversal.
• Semiconductors (SMH –0.24%) were weak again today. Another stalwart rolling over.

Trading for a living is a humbling occupation; even the best traders make many mistakes each and every day. We have obviously been too cautious the past few weeks having missed out on several opportunities. Note to self-it’s going to happen again, just part of the game, no matter how skilled or prepared you are. Knowing it is part of the game really doesn’t make it any easier since competitive people want to succeed, and aren’t happy under-achieving.

In order of the GICS sectors, here are the 36 companies and ticker symbols (alpha order) that I like:

Sector 10: Energy
• ECA EnCana
• IMO Imperial Oil
• SU Suncor Energy
• XOM Exxon Mobil

Sector 15: Basic Materials
• Mostly precious metals at this point [25% invested after the $USD reaches a short-term cycle peak in a couple days as the Euro/Pound sinks due to the credit market crisis that monetary authorities there must stabilize].
• ABX Barrick Gold
• DOW Dow Chemical
• GG Goldcorp Inc
• SLW Silver Wheaton

Sector 20: Industrials and Transports
• ABB ABB Limited
• BA Boeing
• GE General Electric

Sector 25: Consumer Discretionary Spending
• None at this point until the credit markets recover
• After an initial rally from an over-sold condition, most of these stocks will likely miss the first leg of the Bull and start to lift say about March 2009

Sector 30: Consumer Staples
• DEO Diageo
• KO Coca-cola
• MCD McDonalds
• PG Procter & Gamble
• WAG Walgreens
• WMT Wal-Mart

Sector 35: Consumer Healthcare
• DNA Genentech
• JNJ Johnson & Johnson

Sector 40: Financial

• Only a few at this point until the credit markets recover
• After an initial rally from an over-sold condition, most of these stocks will likely miss the first leg of the Bull and start to lift say about March 2009
• HBC HSBC Holdings [very strong in the emerging economies]
• IBKR Interactive Brokers [brokers and traders and not dealers]
• OXPS OptionsXpress Holdings [brokers and not dealers]
• RY Royal Bank of Canada [very strong in the emerging economies]

Sector 45: Technology
• CSCO Cisco Systems
• DELL Dell Inc
• GOOG Google
• IBM IBM
• INTC Intel Corp
• ORCL Oracle
• QCOM Qualcomm Inc
• RIMM Research In Motion

Sector 50: Telecom
• MICC Millicom International
• NOK Nokia Corp
• TEF Telefonica SA

Sector 55: Utilities
• CCJ Cameco [not a utility technically speaking but supplies uranium]
• EXC Exelon Corp [uranium utility]

Buy Alerts (with latest closing price): BC ($15.09), KSS ($40.00), BBBY ($27.05), JCP ($40.93), WAG($33.71), TM ($99.70), PAYX ($33.71), BDK ($65.75), BA ($78.40), DELL ($21.08), CTSH ($26.00), YHOO ($20.78) and WHR ($71.53)

AZ: SNDK ($27.74), HBC ($74.53), CCL ($38.26), and DIS ($28.51).