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Scott Maragioglio (212-692-6392) smaragio@epiphanyresearch.com
We just wanted to show the best performing sectors on an equal weight basis over the last 200-day period. No.1 and No.2 are insurance and gaming! Huh? We would urge traders here to drop whatever sector biases you have and take a fresh look at the market from a sector standpoint. Having the correct sector exposure is key here to staying on the right side of this market. As we can see in the chart below the top third of the sectors have made all the returns over the last 200-day period. If you've been in the wrong sectors it's been tough. 
Scott Maragioglio (212-692-6392) smaragio@epiphanyresearch.com
Let's be clear. This is a broad based rally. We know this because the NYSE and SPX breadth are breaking out to new highs. Is this a really broad-based move that has created a "can't miss" environment? No, it isn't. We have to work to get ahead in this trading environment, but the profits are there to be had if you're positioned right.
We believe the heavy influence of momentum based traders is causing serious cross currents that have created sector bifurcations and an overall choppy situation, especially for breakout traders. We don't see how that aspect of the market is going to get better anytime soon, but we can tell you that since the correction lows this summer liquidity has come back into this market and there has been a broad-based rally.
I believe a lot of traders need to go back to the drawing board on their sector work and make sure they are positioning themselves in the right groups and not simply falling back in to comfortable patterns that they've had over the last several years (like trading semi's when there is nothing going on in the sector, or energy when the group has been flat since February). In my opinion good sector work is really the key to navigating this market. 
John Hughes 212-692-6391 jhughes@epiphanyreserach.com
The market is going up. Every day the Dow Jones Industrials moves higher, setting another closing high. All the news, whether it be the Democrats sweeping both houses of congress, or low interest rates, or strong economic data, is all good. There is no bad news. So, it would make sense that it is easy to make money on the long side since there is no downside pressure and stocks keep moving higher. There may be money being made on the long side, but it sure isn’t easy. Each day it remains a few names that account for the bulk of the strength. Last week, the Dow was up about 1%. Boeing was responsible for just about on third of that rise. Tough to keep pace if you didn’t own Boeing. We may not have much more of a choice than playing the long side, but don’t be fooled. Making money isn’t as easy as it looks.
Scott Maragioglio (212-692-6392) smaragio@epiphanyresearch.com
If your not feeling the full benefit of this rally over the last month it probably has something to do with your sector selection. The fact is that I would be surprised if you were in the best performing sectors over the last 40-day period. The best performing group was biotechnology, followed by insurance, wireless, specialty retail, telecom, internet, and industrial materials. The only sector out of this group I've heard real interest in has been insurance. The rest of these sectors, especially biotech, wireless, telecom and internet have been treated as interesting anomalies at best. I hear more talk from the bulls and the bear on semiconductors and energy then any other sectors.The semiconductor sector has been flat since September and the energy sector has been net flat since February. This is a good example of how our biases have us looking in the wrong place sometimes. 
Scott Maragioglio (212-692-6392) smaragio@epiphanyresearch.com
Last night we talked about the biotechnology sector in our daily report. Here are a few examples of some interesting charts in the sector. The group is looking extended and may be losing it's upside momentum, but the long-term bullish structure of the group is intact and a pullback in the sector would make an interesting entry point on the long side. We're thinking that the Democratic takeover of Congress could lead to some trepidation about the health care stocks. That may provide an opening into the biotechnology group. 
John Hughes 212-692-6391 jhughes@epiphanyresearch.com
The market may have spent the last two weeks concerned with the election. While there is always room for a surprise, the fact that this will be over tomorrow simply removes that uncertainty, no matter what the outcome. If the market was concerned about the election outcome it was very concerned, as the pullback, at least in the major indexes has been mild. This is just further evidence of the missing downside momentum. This doesn’t change the fact there are still problems with this rally. Further strength in the indexes will, most likely, continue to produce negative issues or worsen those that exist, with the internals of the market. The broader market has shown greater deterioration over the last three weeks than has occurred in the indexes. Nothing new with that either.
Scott Maragioglio (212-692-6392) smaragio@epiphanyresearch.com
In the history of bad regulation by government bodies Sarbanes Oxley has got to be the crown jewel. Every since this nightmare set of rules was put into law earnings season has turned into a minefield. You never know when your going to step on the wrong company and get your leg blown off.
The original idea was to level the playing field and make it so that everyone got important company info (like quarterly reports) at the same time (one aspect of this regulation). This way the institutional traders wouldn't have an unfair advantage over the small investor. Now companies won't say a word outside of official announcements for fear of landing in the cell next to Ken Lay. What the law makers didn't understand was that there was a system in place. The company would give the wink and nod to analysts numbers and expectations and the information would disseminate through the system. The stocks would build in these expectations and when the company announced any surprises were somewhat adjusted for. Smart traders, large and small, could anticipate problems and get out in front of them.
Now, no one has any idea whats happening until the company announces it. The problem with this is that any adjustments that may have helped ease the hit are gone and its all happening in one day. Small investors are getting run over by institutional traders on the way out the door. We've seen it happen so many times now that earnings season is turning into a complete mess.Check out the earnings last night from AQNT, and WFMI. 
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