Market followers love to make timing predictions. These predictions come in all time frames and flavors:

• The market has made the high for the day, and will now trade down. Or the opposite.
• This is the bottom. Or the top.
• We have seen the highs (or lows) for the year.
• Or when the Dow was at 9500, would we see 10000 before 9000?

Bold Predictions

After last week, traders may wonder if there is a glimmer of hope anywhere. The market correction expected by many pundits for months finally had a serious impact. Sentiment and expectations have shifted despite a solid earnings season. The market debate continues to focus on the economy, with each data point the subject of both careful analysis and also plenty of spin.

While we participate in the analysis of economic data, we also have a reality check. Our model-driven approach is based upon market data.

Investors and traders alike need to understand market volatility. Many market observers use volatility as a euphemism for price declines. This is completely wrong.

The astute options analyst Adam Warner (one of our featured sources), does a great job with this concept. Writing about the Market Vectors Gold Miners (GDX), he makes this important point:

With the market treading water, it is ever more difficult to find a promising sector. Each week we use our sector model to find the best ETF's and give us some insight into the overall market. Our macro look as become more negative, but there are still a few bright spots.

Our Approach

When there has been a nice market rebound, we should expect to hear the familiar refrain: It is a stock picker's market.

This wise-sounding expression means that it is no longer good enough to "buy the market" whether through index funds or market stocks. It is time for some actual analysis.

For my long-term investors there is nothing more important than corporate earnings, especially when compared to alternative investments.

Here are some key issues that I follow:

Despite continuing skepticism, the market continues to move higher during what many argued was the season of danger. Those following "calendar rules" advised investors to sell in May, to sell in September, and to sell in October. In a couple of weeks we will be out of the danger period. It will be interesting to see if the calendar adherents stick to their method. If they do, we should see fresh buy recommendations from some unlikely sources.

Our indicators are only mildly bullish, but there are specific sectors worth consideration. Emerging market ETF's make up most of the portfolio, but there are also other choices.

Valued commenter Mike C. asks for a change of pace from my regular topics and a focus on more specific stock picking. He notes that I have said several times that there are plenty of opportunities. So what are they?

This is a thoughtful question, so let me start down the path to a complete answer. I cannot get there in one article, but this will be a start.

Last March, at the market bottom, we wrote a three-part series on why a bottom would not be recognized by most investors.

Investors would be misled on valuation. The debate is playing out just as we forecast.

We examine markets with different time frames. Our most successful investor program takes a long view, but we also look to shorter term signals for trading programs. This week we see high risk in most sectors, but an opportunity for the careful trader to stay with the rally. This eclectic strategy has been very effective in recent months.

There is plenty of skepticism. That means that most missed last week's big move. A disciplined approach that looks for opportunity can help with this challenge.

One of our principal missions is identifying the best sources of information on a given topic. This is a major source of value, if done accurately. In the investment blogosphere, however, the ratings mostly reflect the predispositions of the reading public.

The Path to Success in Blogging

When there are several ETF choices related to the same sector, which one is best? There are plenty of considerations, many of which relate to the expected holding period. In our ETF trading we make choices with a three-week time horizon, but trade more frequently if necessary. Liquidity and the bid-ask spread are important.

The right choice may also depend on the method of weighting employed. Tom Lydon asks, "...did you know that different indexing strategies can either make or break your success?" Read his entire ETF Trends article for some great examples. Tom also points to a more comprehensive piece by Ron Rowland at Money and Markets.

Those of us who live in the Chicago area have paid special attention to the Olympic decision. There are a number of theories about what happened. There was an especially strong analysis from Dick Ebersol, NBC sports & Olympic Chairman.

Watch the video to confirm, but his key point is that the IOC has a European focus and is unhappy with the financial relationships with the USOC. There are issues about how much of revenues come off the top, and what other countries get. Ebersol suggests that without some changes in these fundamentals, also affecting the last bid from New York, it will be many years before we see an Olympics in the US.

At any point in time there is a popular thesis, widely shared by those who hold the marginal trading dollar. For many months, that thesis seemed to recognize that the market had become excessively pessimistic. Negative news could be shrugged off.

The prevailing thesis can change very quickly. The daily mantra now seems to focus on the ending of certain government programs.

There is a lot of commentary about the unemployment rate. Various pundits are determined to find the worst possible interpretation of data, and also to impugn any official reports. Let us take a closer look. Many of the answers come from the following source, helpfully highlighted by Barry Ritholtz at The Big Picture:

Measuring Unemployment in the Nineties
Janet L. Norwood and Judith M. Tanur
The Public Opinion Quarterly, Vol. 58, No. 2 (Summer, 1994)

We are distressed at the virtual absence of constructive debate among bloggers. The most popular sources always seem very aggressive in taking positions. This is consistent with what mainstream media seeks on their confrontational segments -- strong opinions, aggressively stated. This is the road to high ratings, but not to investment success.

It is fine to disagree. It is the nature of a free press, a free Internet, and a cornerstone of the scientific method. Why is it that disagreement on the Internet so rapidly strays from a careful examination of the issues at hand?

ETF Investors hope to achieve the right level of diversification.

Making sector-specific investments provides a chance to beat the market averages through focus. Buying ETF's lets you avoid some of the risks that come with individual stock purchases.