OPINION

In Real Life Tortoises Sleep and Eat All Day

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I suspect everyone knows Aesop's story of the Tortoise and the Hare. The fable where the arrogant hare got his comeuppance by the slow yet determined tortoise in a race that saw the hare sleep at the start, grab an early heavy lunch then take yet another nap to sleep off the heat of the sun and all that cabbage. Of course when he awoke the tortoise was too close to the finish line to be caught. Thus far this year the stock market has been the tortoise and the hare—both!

Stocks have been swift and confident like the hare with a single-minded determination of the tortoise.

Yet what happens when the worst traits of both are present at the same time? The market had several shaky moments last week including losing 80 Dow points late Thursday. Then came Friday's session where everything seemed to be going swimmingly, when the bottom fell out with minutes left in the session and week. It was one of those sessions that makes you sit up and take notice. If this hadn't been one of the most amazing years for the market ever, that session might make you sit up, pack up, and head for the hills.

The thing is, this isn't 2000 when cracks in the armor were seen as buying opportunities. People will pack up and head for the hills, but there won't be a mass exodus because the masses never got on board in the first place. But the market is so overdue for a pullback or correction that bulls must be reluctant coming into the week. Add to the mix that this is jobs week and all the economic data out before Friday and it's easy to see angst getting the best of investors. Probably most maddening is not even knowing what kind of news to root for. Good news means less Fed help, but good news must ultimately carry the rally baton.

I've been looking for a pullback for a couple of months which is why we closed out 21 positions last month:

> 18 Winners for an average gain 21% (all held six months or less save for 3 from November and 2 from December)
> 3 Losers for average loss 12%

Everyone should have at least 20% of their portfolio in cash. That being said, if you believe in the fundamentals of your positions, then be prepared to ride them out although, risking 20% gains isn't the best game plan even if you consider yourself a long term investor. While I think the market isn't oversold, it's still overly emotional and prone to manic behavior. Our goal is to take advantage of any widespread selling.

It's time to see if the rabbit runs the wrong way, ignoring historic valuation norms and earnings trends like a stubborn tortoise.

Key support numbers for the Dow:

I. 14,892
II. 13,985

The Market

Stocks are poised to open higher, which is very interesting considering over night news out of Asia including China PMI and the Nikkei's continued correction. Right now how we open is significantly less important than how we finish the session. That being said we're looking to do some rotation into technology, which looks like a screaming buy in general—but of course we want to find the best values.