Resolution

In Take the Money and Run Woody Allen plays a man who is completely inept with women. His friend offers to set him up with a woman who wants only sex. The woman comes on to him in her apartment in very obvious fashion but when he makes a pass she slaps him, refusing his advance. The very next scene shows our hero descending the steps of his unrequited love’s apartment building exclaiming, “How could I have missed those signs.”

Very clearly we missed obvious signs in our piece yesterday. Last week we advised that The Fed statement insured that the market would resolve its correction to the upside. We honestly didn’t expect it would occur so quickly but clearly the G20 announcement that we discussed in yesterday’s entry did the trick. Light volume continued but it is very clear that stocks are just another asset class that is going higher because of the worldwide torrent of liquidity. With finance ministers from all over the globe reaffirming The Fed’s policy over the weekend buying should have been two fisted and on far higher volume. If there is a danger to stocks, it will not come from monetary policy anytime soon.

We had mentioned that we were prepared for the long side and posted some suggestions on our sister blog. The best performer of these, by far, was Apple (AAPL). The others were mid-caps that were higher but met with limited enthusiasm. The reason appears rather obvious to us. Big caps have international exposure and thus will benefit from a dollar that will not soon rally.

This is not to say that mid and small caps should be ignored. Of nearly 300 52 week highs on Monday 45% were midcaps and 38% small. But a check of the major markets shows the big cap indices making or closing in on new highs while the mid-cap index lags and the small cap lags even the mid-cap. But selectivity will be key in these arenas. Smaller companies will be far more beholden to the domestic economy.

Clearly commodity based stocks are leading the charge, but we think there are excellent opportunities that are not so extended in the medical, technology and retail space, and we’ll be posting them on our sister blog throughout the day.