The Day Ahead: Don't Let Them Calm You Down

 | Feb 19, 2013 | 8:00 AM EST
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Surprise, surprise: I am a convicted market stalker -- one who has the "juice" of all things related to the market running through their veins. Frankly, it's a primal thing. I encourage membership in this market-stalker club, because if you normally don't pay attention to the day-to-day grind, you might not know the major averages stalled last week.

Sure, any piece of unfortunate global macroeconomic data must be disregarded for its backward-looking nature. Wal-Mart's (WMT) "Email-Gate?" Whatever -- the fundamentals of the market and corporations are rock-solid. Everything is fine and wonderful, you are being told, so switch out of those bonds and into richly valued small-cap equities (made so by these stocks front-running results that would support the optimism).

My point? March to the beat of your drum and reflect on investing lessons through the years. Rebalance your portfolio after this strong rally year to date, and be cognizant that a stock market does not go up forever, contrary to popular wisdom. Many of the suits want you to subscribe to the view that stocks are borderline riskless asset due to Federal Reserve giveaways. If 5% of your profit evaporates, they will hop on the phone and rifle off a "calm the client down" methodology emailed from the marketing department. I know each one of you is smarter than that.

Needless to say, I don't particularly appreciate how individual investors are being treated at the moment -- and I know because I get the emails. It just seems they are being told certain bullish things while the big accounts lighten the load a touch, as seen via the market's action during the first "stall period." In fact, here are some data I've unearthed from my stalking exercises:

โ— I'm seeing weak action in shares of the major logistics companies -- names such as C.H. Robinson (CHRW), J.B. Hunt Transport (JBHT) and Landstar (LSTR), which tend to get lost in the Dow Jones Transportation Average. When combined with the Wal-Mart sales news, an underlying story emerges: The domestic economy isn't strong enough to drive the type of top- and bottom-line upside the market has decided to price in.

โ— Far be it from me to become the policeman who breaks up talk of mergers-and-acquisitions mania. But stop and think for a minute on this renewed activity. Companies are sending a signal that they have to buy growth in order to support the expectations built into their stock prices six to 12 months forward. To me, this is a show of concern on the near-term sales and earnings outlooks for many companies. You heard it here first.

โ— We are getting hulking earnings warnings from retailers despite supply-chain costs that are definitely not inflationary.

The path forward must be rooted in discipline, even though I am sure you are itching to take 30% of Little Johnny's college fund and hand it over to Mr. Shark.

Back in the market? Stay the course, check valuations on every holding in your portfolio and trim anything that has risen beyond a reasonable growth outlook. That essentially will have the effect of raising your cash position, which is not the end of the world as we await the market's next move.

Still hanging on the sidelines? Give growth stocks a cold shoulder and throw some love in the direction of dividend-paying value names -- a style that has played second fiddle to growth of late. By the way, for those of you who saw my last Fox Business segment, when I said I was positive on Microsoft (MSFT) post-earnings: I am still positive post-earnings.

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