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As we all know, timing the market is virtually impossible. However, there are times when prudent adjustments need to be made, now being one of them. There are four main issues that are cause for concern at the moment: February is typically an ugly month for performance (the second-worst only to September), the "Post-earnings nap," the upcoming Sequester debate, and that the public is getting very bullish, aka increasing positive sentiment.

The first one, ugly February, is pretty self-explanatory, and the "post-earnings nap" I covered in my last article. The sequester is the automatic $1.2 trillion in spending cuts that go into effect just two weeks from now if Congress cannot agree on a deal. Even though I do believe a deal will be reached in the 11th hour, the battle leading up to it will be downright horrid, reminiscent of last year's debt ceiling debate, which caused a massive sell-off in the market. All three of these are short term.

The increased positive investor sentiment has me concerned for the longer term. This is most visible through mutual fund flows. According to the Investment Company Institute, cash flow into equity mutual funds for January totaled $27.3 billion. That stands in contrast to the $6.9 billion outflow in Jan. 2012 and exceeds the $16.5 billion inflow during the first four weeks of 2011- a year that saw strong positive cash flows through early June. Add in the massive demographic overhang of 92 million baby boomers past their peak spending years, which I illustrate in "Facing Goliath - How to Triumph in the Dangerous Market Ahead," and a crisis is brewing, which will not be kind to unprepared investors.

This is very representative of late bull market behavior as the public almost always gets on board at the end of a run as institutional traders, often called the "smart money" sells to the unsuspecting public investor near the top. Believe it or not, there is a statistic that tracks this. Each week, block trades of 5,000 shares (institutional traders) or more on the NYSE are tracked as to whether they occur on plus ticks or minus ticks, with the former accorded a status as buys, while the latter are considered sells. And, for five of the six weeks so far this year, the ratio of ticks has been below 1.00, indicating a majority of trades occurring on minus ticks, that is, sales. In addition, Block Volume has been above the 10-week average, with one exception - the sole week when the block ratio was above 1.00.

All of the above coincide well with my forecasts of a strong market through January, a pull-back in February, a resumption of the rally in March/April to new highs, followed by a more severe correction over the summer, and then a strong end of the year. Obviously these are not easy times for investors, but nimble investors with properly positioned portfolios will fare well.

Investors should be hedged or out of the market until the sequester battle is over. Once it's resolved, and it will be albeit at the last minute with much rhetoric, a deep scare. However, once it is behind us, stocks should resume their uptrend. Therefore investors can buy growth stocks, and particularly the high-quality tech companies such as Apple (NASDAQ:AAPL), which is getting some bad press right now due to competition, but that is something it always seems to come back from; Google (NASDAQ:GOOG); Intel Corporation (NASDAQ:INTC); Qualcomm (NASDAQ:QCOM); Microsoft (NASDAQ:MSFT); Cisco Systems (NASDAQ:CSCO); Yahoo (NASDAQ:YHOO) and VMware Inc. (NYSE:VMW). The funds with more diversification and less individual company risk are also the ones to buy, like the SPDR S&P 500 (NYSEARCA:SPY), PowerShares QQQ Trust Series 1 (NASDAQ:QQQ), and iShares Russell 2000 (NYSEARCA:IWM).

Commodities and metals specifically lagged for the last few months, but are very attractive, as QE and federal stimulus are not going away anytime soon. More aggressive investors can play this sector through Goldcorp Inc. (NYSE:GG), Barrick Gold Corp. (NYSE:ABX), SPDR Gold Shares (NYSEARCA:GLD), Power Shares Double Gold (NYSEARCA:DGP), Market Vectors Gold Miners ETF (NYSEARCA:GDX), Newmont Mining Corp. (NYSE:NEM), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), plus Silver Wheaton Corp. (NYSE:SLW), ProShares Ultra Silver (NYSEARCA:AGQ) and Fortuna Silver Mines (NYSE:FSM).

Source: Washington's Bickering Could Harm Investors