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Investors: Forget the Market Theories; Watch These Two Sectors to Determine Broader Strength

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Considering semiconductors are in almost everything consumers buy, and all consumables have to be transported, these sectors typically lead economic expansion.

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So what's holding the markets up? It seems the PHLX Bank Index (INDEXDJX:BKX) and the PHLX Housing Index (INDEXNASDAQ:HGX), which have been underperforming since 2007 for obvious reasons, are the catalyst. Thanks, Ben Bernanke. With that said, it's not just in these two areas where strength is rising; it's emerging in the high-beta names as well. To opine further, this is simply due to momentum players chasing return -- a dangerous game to play.

Regardless of why and how, the question becomes: Is it enough to sustain longevity of a higher move and push the market to the 2000 & 2007 highs? (~1,550)? Momentum is a tricky animal; the more it surfaces, the more it feeds on itself, but it only lasts until there is no one left to continue the buying. As sad and as big a faux pas as this is to pen, especially in the financial business, it's akin to a Ponzi scheme as it only begins to crater when the last buyer is finished, hence the danger in a move based solely on momentum. One indication of its peril is when the move becomes parabolic.


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No positions in stocks mentioned.

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