It is interesting to note that in February the markets end higher. However, the challenge for investors is the market is stuck in neutral. On October 21st the S&P 500 index was at 1101 and on the last day of trading in February it was at 1104. In the meantime we have moved 50 points either side of that number. Thus, we have not made any progress and the range has been roughly 5% of neutral. This goes to the point we made last week of a directionless market due to a lack of clarity and confidence.

There have been trading opportunities, but the longer term views remain suspect. I spent time sifting through the data points on each of the sectors and they look similar to the broad market index with the exception of the Consumer Services sector. I then tried to project forward what sector stood the greatest probability of moving higher or leading the broad markets higher. This became a challenge with the clarity relative to growth. There are short term technical trades setting up, but we are still in a questionable phase fundamentally.

This leads me to the next issue facing investors – patience. Too often during periods like this we get anxious and force positions into our portfolio. They come from listening to, reading about or seeing something that catches our attention. Being patient isn’t a strong suit for investors. They want things to happen and now would be a good time. With that in mind step back, take a deep breath and relax. This too will pass.

If you must trade or invest find a sector within a trading range and trade the range while the broad markets work through the consolidation of the previous run higher. Energy is one of those sectors currently in a definable trading range and has enough interest to move the sector up or down with volume. XLE or IYE, both ETFs focused on the energy sector,  would fit the bill. The energy commodities are in a similar trading range if you want more volatility and speed to the movement within the range. The point being have a definable strategy that fits the current market environment if you are going to put money at risk currently. Otherwise cash or cash equivalents are a sector to wait for better clarity with little to no risk of principle.

I covered all the major sectors in this weeks podcast or Friday’s Daily Exchange video. Take 10 minutes to listen to them and gain some perspective on what is leading and lagging the broad markets currently. Have a plan for the week and months ahead. Be disciplined in your approach to managing your money. Risk management is the key to sound money management.

Have a great day investing.