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Ugly Day, Mixed Technicals

The chart above is of the VIX, or volitility index. When we get into ugly markets like thus far in 2008, I like to check on the VIX to see if we are approaching a turn. I’ve talked about the Oscillator I follow in recent posts, but I haven’t mentioned the VIX recently.

If you see the two lines that poke above 30, those were the turning points in the corrections in August and November. The VIX ended today a bit above 25, which may indicate that market participants have not yet entered a state of panic. Panic lows are great buying opportunities, and I’d say we are approaching a rally.

The oscillator I follow is showing that the NASDAQ is definitely oversold, and that the NYSE has entered oversold territory.

I mentioned in a December post that we were going to be building cash in client portfolios and as the year-end rally progressed, we did just that. We will probably be putting some of that cash to work in the next couple of days since the technicals show we should be putting in a bottom soon and getting an oversold rally. We will also likely use the rally to make some sales that we weren’t able to execute before year-end as we reposition portfolios for a slowing economy.

We will be increasing allocations to the health care sector and other areas with solid earnings growth that won’t be negatively impacted by a slowing economy. We’ll also continue to build positions in Ag, energy, biotech, gold, defense, and selected tech names with > 25% earnings growth projected.

Hang in there, take a Tums, and be ready for an active year in the market!

Mark