It’s December and the market is poised to start on an uptick. Last night I discussed the sentiment of the market seemed to be leaning towards the upside. The move last week relative to Dubai is turning out to be an opportunity to buy? The selling has been defined as profit taking and those wanting an excuse to get out to the market prior to year end. Whatever the case the short term is looking up. It doesn’t take the risk out of the picture and I would remain diligent with risk management.

Large cap stocks have emerged as the leader short term. Money rotation is cycling towards the sector as more of a defensive play than a play on growth. I would look for money to continue in this direction into 2010. The small cap sector remains cooked in a squat. They broke below support at 305 intraday and managed to rally back to close at 306 on the S&P 600 index. IF the broad market pushes higher the sector could push back towards 320 short term.

Technology looks positive overall. The uptrend remains in play with the 50 day moving average acting as support. I would look for the sector to be one of the leaders if the uptrend for the broad market is to continue. Build positions in the sector as opportunities presents themself. See Scan List Update.

China sold off along with many of the country ETFs on the news from Dubai last week. I would look for the opportunity in the near term from the selling. News from China remains on the positive side economically and the outlook is optimistic. At least worth watch short term.

The balance of the world is still in play. Watch the emerging markets to pick up in volatility off the Dubai news. This story isn’t over just because the $26 billion in question is being restructured and the I.A.E. stepped up to help. The problems are deeper than reported and the ripple effect in the emerging markets are likely to continue over time. Be cautious and look for the opportunities in the strong regions like Brazil and Australia to benefit from the reactions short term.

The dollar remains an issue for the U.S. It has attempted to bounce back above 75 on the dollar index, but has not managed to overcome the negative sentiment. No help from Washington and not likely to be any love near term. They are too busy spending more money to “fix” healthcare. Watch the downside risk of the dollar and ripple effects you can play.

Watch the defensive sectors (healthcare, commodities, utilities and telecom) short term with money rotating away from the higher risk growth areas. The transition is in motion and how long it will last has too many variable to cover. Money wants to find a “safer” haven short term.

Gold is trekking towards the $1200 mark as metals continue to the steep climb higher. Oil is likely push higher with stocks towards the $80 mark again. Agriculture started higher the last two weeks and looks to renew the move. Base metals are positive and this all points to commodities being in favor with investors near term.

Stocks remain an investment of choice. I discussed last week the liquidity trade driving the markets and that is still in play. I am looking for December to provide some upside as a result of the global liquidity. Volatility is picking up and that has created some of the fear in the market overall. The bears may be restless, but they are not yet in control of market direction. This is where you have to take a deep breath and follow your disciplined strategy towards investing.

Overall there are going to be opportunities as a result of the volatility. You have to be disciplined in your approach to playing them and remains focused on managing risk relative to the markets.

Have a great day investing!