Another Week Of Gains Amidst Growing Nervousness!

Another week of gains as the S&P rose .9% for the week. However, the market fell slightly Friday, the first down day in the past nine. Investors seem a bit nervous at these levels and the market may be getting a little ahead of itself. Frankly, a short consolidation period could be just the ticket to calm fears, particularly with all the uncertainty this weekend around Healthcare legislation. All in all, the economy continues to show positive signs as inflation remains low and jobless claims left few surprises. In addition, the FED kept interest rates low and suggested they would follow that course over the near term. However, there are signs that foreign governments may begin raising rates, and in fact India just took that course. If foreign interest rates begin to rise that will further pressure the FED to raise rates sooner than later creating market headwinds. The long term fundamentals for a rising market are good, although the market has been very hot since hitting those January lows. Investors should not be surprised if there is a pullback over the near term. However, we would consider a pullback a buying opportunity, a time for the market to catch a breath. A prudent approach right now might be to take some money off the table as we did last week with the sale of two positions. We may be a little slower to reinvest to allow the market more time to consolidate over the near term. We enforce that discipline by just being more selective over the opportunities available for reinvestment. Next week could be interesting for the market, particularly as the outcome of Healthcare legislations becomes more clear.

Momentum And Value (MAV Screen): Breakout Stocks To Buy!

What Stock Tips do we have? Delta Apparel (DLA, Apparel), Universal American (UAM, Insurance), City Telecom Hong Kong (CTEL, Communication Services), PHH Corp (PHH, Consumer Finance), and Maidenform Brands (MFB, Apparel) remain buys from our Breakout list published last week. Last week we also uncovered an attractive buying opportunity on Aeropostale (on our buy list last week). We chose to buy a call spread instead of buying the Aeropostale stock outright which we describe in more detail later. We kept CTEL on our list, but would caution that investors may want to wait for a consolidation period before jumping in since the stock rocketed 15% on Friday alone. We also added Rosetta Stone (RST, Software & Programming), a provider of language learning solutions. The stock price has been on a tear since their February earnings release, rising more than 50% over the past month. We do not plan to chase this one, but may buy on a pullback if the stock comes under pressure from rising too fast. The market may be getting a bit overheated, so we took some money off the table last week by selling two positions. Frankly we are not in a hurry to buy unless market conditions change or we find a compelling opportunity. However, while the odds are good for a minor pullback, we also do not expect a major correction. A longer consolidation period or a minor pullback would be a healthy sign for the market.

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