Monday, March 24, 2008

Be Careful With This Rally

We're seeing some more favorable market action today. Bear's bid got upped, which many expected. Also, little news out on economic fronts, which spells recipe for rally. Still lots of short covering taking place. The Fed's liquidity appears to be helping confidence, at least in the short term. Other things like Visa's successful IPO are giving investors something to get excited about. There has been a lack of safe havens for investors with stocks being volatile, and treasury yields low. I think this is party why we've seen such a rally in gold and commodity stocks. Simply no where else for investors to put money.

I continue to like large-cap industrials. Take a look at ishares industrial ETF (XLI). Largest holdings are GE, 3M, United Tech, Boeing, Caterpillar, Deere, Honeywell. All companies with strong balance sheets. They should perform well due to growing overseas infrastructure, and the expectation of the U.S. spending more money on bridges and roads in the upcoming administration.

I wouldn't jump full force into this rally, but pick away at certain names. Stay neutral here. The bulls are saying "all-clear, good to go", and the bears are saying "bear-market rally."

I don't believe either.

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