We’re weeding the leaders from the laggards

The markets showed a lot of power by going straight up for the whole month of January. We had a whole mix of things happen such as breakouts that followed through like Celgene (CELG) as well as breakout failures like Nationstar Mortgage Holdings (NSM).

We had stocks breaking down such as PetSmart (PETM), VMware (VMW), Apple (AAPL), Constellation Brands (STZ) and Liquidity Services (LQDT) and stocks rising from the dead such as Netflix (NFLX) and recently (SWFT).

Due to the forceful moves in these and other stocks we believe the U.S. stock market and global markets are now poised for big moves. The Covestor Trend Following Model may get very active if the market starts to show a spread of either stocks breaking down to cause a sell-off or stocks breaking out to new highs causing a major multi decade breakout.

In other words, “We like what we see!” Active stocks reacting to their own individual news and not as a uniform mass of stocks all marching the same way. We believe this helps us with our goal of separating the great new leaders from the laggards.

We expect big moves however we do not yet know which way they will come. We can only view the markets now and look at the number of high volume rising stocks versus the falling ones.

This is a time where we let go of much of the attention on what the market is doing and focus more on individual stocks. If we see a spread specifically in one direction we will again focus more on the general market to help guide our investments and trades in that direction.

This moment is very interesting for us and we see lots of rotation that we believe will surely separate the amateurs from the professionals in the next few weeks and months.

A few news factors that we are interested in are the increase in U.S. oil and gas production, Japan’s increasing the printing of its currency, European countries wanting to break away from the European Union, and the U.S. debt ceiling and potential sequestration.

We look at this news and it is interesting but have faith that our analysis will warn us of news well before the mainstream media publicizes it.

Stocks may soon have very huge moves up and/or down. So we adjust to this new dynamic.

The investments discussed are held in client accounts as of February 20, 2013These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.