#4:  Bestsectors.com

 Newsletter Monthly Review

Year 2010      Note 2

Date as of April 1, 2010

Dear Subscriber,

The month of March was a great month for the market.  We did well with our own funds.  March also ended the 1^st quarter of the year.  After 13th weeks of  the year and the first day of the second quarter, here is where we now stand:

·         Dow: +0.71% this week & +4.79% this year

·         S&P 500: +0.99% this week & +5.65% this year

·         Nasdaq: +0.31% this week & +5.88% this year

·         Russell 2000: +0.74% this week & +9.37% this year

Where Do We Stand?

Our own portfolio for the year is up to 2.9%, which is excellent since last month we were down 2.0%. So for the month of March, we were up 4.9%. I will take that!  As I stated in the March issue, I thought we were at a critical moment in the market.  I believe that this market could have turned either way and for our sake I am glad it turned positive.  But again, I must remind you to stay on your toes and make sure that you are managing risk.  I still believe this market is very tippy and could change very fast to the downside.  For April’s newsletter I will be going through some of the charts that I always go through.  I will examine where I think and others think this market could be heading for the summer months, and I will finish by talking about managing risk when it comes to your own portfolio.

First, I will discuss where we are at with some of the charts of the various sectors that I am invested in and some of the sectors where I thought might be good opportunities in the last newsletter.  As you know, I have been invested in the Fidelity Technology (FSPTX) for most of this year and as I have mentioned before that I believe we are at 2/3 of the way up the escalator.  In the S&P 500 right now technology companies sit with the highest percentage of cash than all the other sectors, which I believe puts them in a very good situation with regard to the market.  I will be the first to admit that perhaps other sectors invested would of allowed for a better performance record (YTD) than technology.  Again, as I have stated before, anytime you are investing you must fully analyze all the funds that you are holding.  In my research I am comfortable with holding Fidelity technology (FSPTX)for a while longer.  The fund from March 1^st to April 1^st was up 7.95%.  Again, some of you might not be comfortable holding this fund and that is why you must make the investment choices your own.  I only hope to provide you with some information to help you make a better decision. 

So let take a look at the Fidelity Technology (FSPTX).

As you can see from the chart we started out in 2010 with a down turn in the fund as shown by the big red candle. But since then, we have progressed nicely upward.  As of April 1^st, 2010, we sit at $77.98.  I do not see much resistance in the chart perhaps seeing us go to at least the $82.00 range and if we can break past that, than we could really get going.  A couple of things that I would like to see happen.  First, I would like to see that 50 MA turn into a more uptrend. Right now the line is a little flat, but it is looking like it is starting to bend.  Second, I would like see a similar pattern in the RSI line like that back in April of 2006, which looks like it could happen.  If these two things happen within the fund, then I think we could see those price targets reached. 

The next chart that I would like to look at is Fidelity Select Software/ Computer (FSCSX).  Again, just to make it clear, we are holding this fund as well in our portfolio.  This fund, from March 1^st to April 1^st, is up 6.02%.

The chart points out that this fund experienced a drop at the beginning of 2010 much like the Fidelity technology fund.  As of April 1^st, 2010, this fund currently sits at $76.64.  A couple things different about this chart compared to the technology (FSPTX) is there is much more resistance in this chart. But I also clearly see a bending of the 50ma line in an uptrend.  This fund I see doing two things.  First, if it can break $77.50, I can see it going to $80.00 pretty quickly and stay range bound, between $80.00 and $82.00.  Second, if this fund can not break the $77.50 range, I can see a break down in this fund, which would cause me to leave. One other thing to mention is the RSI is sitting flat. If it breaks upward, then we are in good shape.  But if it dips, then I think you will see the drop.   Next week will be a real test for this fund in which way it will go, so if you are invested in this fund keep a close eye on it next week. If it breaks down then be ready to move.

The next chart that I would like to look at is Fidelity Select Computers (FDCPX).  I am currently holding this fund in my own portfolio.  This fund from March 1^st to April 1^st is up 7.13 %.  I really don’t see much resistance in fund until we get to around the $52.00 range.  This fund really could get going and move above its 08’s highs at $52.80.  The 50ma is starting to turn upward and much like the Fidelity technology fund, I think this fund really has some potential.  Again, always manage risk and be ready to move out if things do not materialize in this fund.

I mentioned the next fund Fidelity Select Defense/Aerospace (FSDAX) in my March newsletter as a fund that I would be interested in getting into if the others that I am holding start to fall.  This fund has gained from March 1^st to April 1^st 10.65%.  That is a really impressive number.  This fund has moved above the 50ma, which is a good sign and the 50ma is starting to turn.  I see this fund running into some resistance right around the $70.00 mark.  If it can break through then I see it going to around $75.00.  If you are invested in this fund keep an close eye on it and remember you should be looking at those top ten holding within the fund check to make sure that the companies are having good earning reports.  Also you should be looking at the technicals within those companies as well.

The next fund that I talked about in the March newsletter was Fidelity Select Medical Delivery (FSHCX).  This fund from March 1^st to April 1^st has gained 6.24%. 

 I see this fund running into a little resistance at around $49.00, which if it can break through then I see this fund moving to its 08’s highs at 52.81.   If you are in this fund, I see no reason right now to get out and go else where.  I think right now you are safe. 

The last fund that mentioned in the March newsletter is Fidelity Select Leisure (FDSLX).  This fund from March 1^st to April 1^st has gained 10.26%

 I see this fund running into resistance around the $77.50 range.  All the funds either that I am invested in or that I listed in March are up.  Some of the funds are even up double digits.  Like I said at the start of the newsletter, March was quite month.  Lets hope April does the same.

Sector Chart

Remember that our strategy is based on longer-term trends. Our sector funds may not change dramatically from one month to the next. 

Where Is This Market Going?

So where is this market heading for in month of April and the rest of the year?  First, before I try to answer that question, let’s point out things for the 1^st quarter of the year.  For most of the 1^st quarter of this year, the market has been a low volume market.  Even on days when the all various markets (S&P, Dow, NASDAQ) are up, the volume within the markets are lower than usually, which makes me cautious.  Second, with regard to the 1^st quarter,  I like to see the smaller markets like the NASDAQ and Russell 2000 leading the way each day  instead of the Dow in percentage increases.  Finally, I am concerned about the debt of our nation, as well as, the others countries, namely the (PIIGS) that are in debt.  Some of things that make me feel that this could be a real bull market are that most of the economic data coming out has been positive.  We have consumer confidence starting to come back, growth in GDP, and unemployment numbers are coming down.  I think the unemployment number is the biggest factor for this market to really get going.  If more people are finding work or going back to work, consumer confidence will continue to grow, company expansion will happen and you will see more investment dollars come back into the market.  Back in the March newsletter I said that the first week of March was a real critical time and what I thought might happen did.  We had for most of month good economic reports.  By the end of the month, the health care issue was finally settled and I believe that we are starting to see some optimism. 

I would like to spend some time talking about what we need to pay attention to this summer and the rest of the year.  Then, I will provide you with some thoughts that other have for market ahead.  First, we need to watch what the federal government does with financial reform and what it does with the Chinese currency problem.  If they go too far in either, then you could see the market get real nervous and dip.  Second, we need to pay attention in the other parts of the world with regard to Europe debt and the problem in Iran.  If we have more countries that have debt problems like Greece, then we could see the markets drop.  If sanctions do not solve the nuclear problem with Iran and we have to go into Iran or Iran stops oil production, then in either case, we could see a drop in the market.  Finally, in our own country, if the unemployment rate numbers increase, states with debt problems are not solved, and lose consumer confidence, then you could see the markets decline.  If the unemployment numbers starts going up again, then I think you will a lost in both consumer confidence as well as investor confidence, which will have adverse affects of the market.  One big problem that is not much discussed is the huge amounts of debt that many of our most important states face.  If the federal government has to come in and offer a second stimulus package, will be needed to bail them out, which would be a disaster for the markets. 

In the March edition of Futures magazine, a nice article is written with some very smart advisory on where they think we are headed for the rest of the year.  I will provide you with a summary, but I encourage you to read the article for yourself.

 First, Keith Springer who is president of Capital Financial Advisory Services gives us his outlook for the year.  Mr. Springer believes that for the most part people are going to be surprised by how strong the market will be this year.  He thinks we could possibly see an increase of 15 to 20% this year.  Mr. Springer thinks that the two most important things for this market are liquidity and low interest rates. 

Second, is Paul Larson equities strategist at Morningstar sees the markets going up about 10%.  Mr. Larson thinks that the markets are not overvalued and thinks that a rebound for the markets will continue for 2010. 

Third, is Shawn Hackett, president of Hackett Financial Advisors.  He believes that a 10 to 20% correction in the market could happen at any time.  Mr. Hackett thinks we could see the Dow between 9,000 and 9,200 and the S&P 500 at 950 to 970. That would be quite a drop from where we at in both markets. 

He sees a gradual improvement in the economy and he thinks stock prices are overvalued compared to the economy and sees them moving back in line with economy.

Finally, Richard Roscelli broker at Whitehall Investment Management is really uncertain what is going to happen with inflation.  He thinks if we see inflation start to go up then more money will enter the market.  Mr. Roscelli sees Dow at 9890 and the S&P at 1041.  So, of the four individuals that I mentioned from the article, all of them have different opinions and reasons why they believe that market will be up or down for the year.  I do not think any of them talked enough about international forces that I describe earlier playing a role in our markets. 

Risk Management:  The Most Important Rule

You have taken in a lot of information about where we are invested and where we think the market might be headed.  I will tell you that none of that matters if you do not manage risk.  If you see the funds you are invested in starting to drop and you do nothing about it, then all the information you read does not matter.  If you learn anything from this website, I hope it is that you must always beware of your account and watch the top 10 holding within the various funds you hold.

 As an investor, you must be aware of your investment style. Do you wish to be active in your investments or more passive in your investments?  People that are more passive in there investments tend to want to invest in index funds or rely on a fund manager to take care of there retirement account.  They are either expecting the particular fund or fund manager to manage risk for them.  Many times however, because they are not involved in there own account risk is not managed that well and there retirement account suffers.  For those of that are more active in your trading account, managing risk is the utmost importance for you to be successful.  As an active investor managing risk also means controlling fee cost as well knowing why to leave a particular fund.   I as an investor believe that if I am the one that is working everyday to build my retirement, then I want to control my own retirement and manage the risk of controlling my account.  For some of you this might not be your interest that is where my website or others can come in and help you with risk management without the high fees of a fund manager.  No matter what you do you must understand with any investment you will have risk of some sort that you will have to deal with.  If you want to learn more about understanding who you are as an investor, I suggest that you read of Brett Steenbarger who has written many books about trading psychology, managing risk, and other important areas that really help you to better understand yourself. 

That will do it the April newsletter.  I hope I have provided you with some information that will allow you to make better investment decisions.  I have started a Market News & Commentary page on my website to provide you some daily information about the market as well as provide you with some stock trading ideas that the newsletter does not do.  I have decided to do this because of the number of e-mails that I have received as for this specific purpose.  I hope I can provide some information that you can use as an investor with the newsletter and some information that will help you as a trader.  I look forward to continuing to serve you in both ways.

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