The Middle East unrest continues and this will likely make our markets uneasy in the meantime. This situation may last longer then we want it to as President Mubarak does not want to resign even though the people have clearly spoken.

This situation has re-energized oil prices and oil stocks that drill in America have seen some buyers.  I am looking for more sector rotation to oil stocks which have been beaten down lately but, the rush to cash could simply overwhelm all sectors at any point in time, much like we saw on Friday.

The Saudi stock market opened up 2% higher so, we could still resume some bullish behavior.  However, I wouldn’t be an aggressive buyer unless you keep tight leashes on your trades.  The market tend to digest information like this and after the initial fear, it becomes desensitized and ignores it. Look for that to take place in time. We can’t simply predict/hope that it will happen too quickly without more confirmation.

I am keeping smaller positions and starting to hedge to the dark side a little bit more.  I will be looking for the oil sector rotation but, I will not be banking on it.  Be careful this week and consider raising a little cash to help you feel better about the volatility. It can be very painful to be fully invested in an uncertain market.  We still have POMO behind us and I do not expect a market collapse as long as we have that working in our favor.  That doesn’t mean we can simply ignore the warning signs we are now seeing.

Good luck out there,

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