Before Cheering the Rally in Infrastructure and Agriculture, Remember November

As mentioned Wednesday [Who Will Be the Last to Fall], the pattern we had when stocks free fell in November was that four sectors held up while everything else started getting hit: teflon tech (Apple, Research in Motion, Baidu.com, Google), solar, agriculture and infrastructure. Then in order, teflon tech fell, solar fell the next day, and finally there was a massive one day raid on the agriculture and infrastructure names.

For the last couple of days,  we've had some weakness in the teflon tech stocks - in fact Baidu.com (BIDU), Google (GOOG) - and Research in Motion (RIMM) - only Apple (AAPL) sits far away - anticipating a monster good quarter I assume.

Solar leaders are still 'flat' but not showing the fervor of recent weeks - the stuff that is flying now is the most speculative, and daytraders are simply hungry for any sub $20 stock to run up.

And agriculture and infrastructure continue to ramp up - TRA +8%, CF +6%, MON +6%, MOS +5%, SGR +4%, KBR +4%, FWLT +4%, AG +4%, etc

If not for the exact same pattern playing out last time I'd be very heartened by the rally in the latter two groups. It would seem way too easy for things to play out in text book repeat fashion as in November, but thus far, most of the market stinks. A few select sectors have held up, but now we are seeing the leading edge weakness (save Apple) in 'teflon' tech stocks (for new readers that is my term for stocks that in summer/fall 2007 held up as if nothing was wrong with the market). And solar might or might not be in transition....

If we fall through this S&P 1440 level which, as always, is defended - we might see this transition back downward and these last groups standing fall, but so far so good as these two groups I have been stressing in the fund since day one (either infrastructure or agriculture has been the biggest weighting for 90% of the time), and the areas I view with the most pricing power, visibility, and backlogs for the next 2-4 years continues to show amazing strength. Even previously strong areas like coal are taking some hits, so I continue to watch these 4 sectors to see where the market is potentially going...

Meanwhile defensive stocks like MedcoHealth Solutions (MHS) show some strength of late...

In general this is not a great mix. But let's see what the market has in store for us. On Friday, we have a jobs report - a gov't figure which is essentially useless as its a theoretical model that can be manipulated by the birth/death estimates and its margin for error is well over 100K. Yet the market trades off this faulty figure as if it's some Holy Grail, so even if one dismisses the accuracy of the reporting, one must be cognizant that it moves markets.

For now the market seems on hold until this report comes out. What I find amusing is you just never know what the market 'hopes for'. A bad employment number means the economy is heading for the tank (which stinks), but hey we could get 50 basis point Fed cut or an intrameeting cut (cheers!). Quite ridiculous in many ways, but this is the market.