The markets were boring yesterday, but the good news is they held the move higher from Friday. The challenge for you and I as investors is being patient enough to let things develop. But, the reality is the uptrend is still in play and our play list has benefited from the move higher. This is why tracking and investing according to your discipline is key to success. I would add to that statement, not being afraid to take a small loss if the plays doesn’t work out. I was told by a successful mutual fund portfolio manager, “the key to being good at investing is letting your profits run and keeping your losses small.” The reality of that statement comes in developing a strategy which accomplishes the goal. That has been my goal for the last twenty-five years, learning to let my profits run and keeping my losses small.

To that end, I have been watching the movement in the market sectors as usual, but the interesting part is the movement relative to financials, basic materials, energy and telecom. At first blush my reaction is to say it is a result of them lagging and the values being attractive to institutional investors to add to portfolios. But, the reality is some money is rotating in their direction based on a longer term outlook for growth in the sectors. I believe we have to take a serious look at the sectors and start breaking down the opportunities in each as a viable opportunity.

From a broad perspective the energy sector is the most intriguing to me. The commodity, crude oil, has been rising off the low of the recent trading range since early February. It is now at the top of the trading range near the $83 level. A break higher would be bullish, but more importantly the stocks in the energy sector would stand to benefit. Crude is up more than 17% during this period, but the stocks are only up 8-9%. Why the difference? Belief that crude will maintain this level versus retesting the lows of the trading range. Thus, my interest in the sector. If, and that is a big if, the price of crude remains at this level and even moves higher, the stocks will move up as well. All of this is an interesting concept worth watching and tracking for taking advantage of if it pans out. If it doesn’t, oh well I made money in crude.

Note that I said track the idea, find the opportunities within the idea. I didn’t say go out and buy these stocks on the premise they are going higher. This is part of my original strategy above. I like to find high probability plays where if they move up I have a good rationale for letting my profits run (belief). Too often investors cut their profits short because they don’t believe in the move higher. Cutting both your profits and your losses isn’t a winning combination.

Be patient as this market works its way higher and investors make their determination if the move is believable or not. For me, the sectors hold the key to the answer. Have a great day investing.