Play the Trend, But Watch Your Back

stock performanceThere continues to be some amazing stock market performances from some very well known large-caps. DuPont (NYSE/DD), Caterpillar (NYSE/CAT) and Apple (NASDAQ/AAPL) are but three names that stand out as large market capitalization stocks that are generating some serious investment returns for shareholders. Not all stocks are participating in this market, but a lot are.

I would own the market over the near term. I don’t see any reason why shares prices can’t continue to advance in anticipation of fourth-quarter earnings season. Only a big catalyst like war or a sovereign debt issue could provide the uncertainty the investing marketplace doesn’t want. The performance of the transports is looking good. The performance of the NASDAQ is looking good. Leading indicators are rising, so we have a good environment for share prices to keep ticking higher, even if the market looks stretched (which I think it is).

One of the things I’ve learned after two decades of following capital markets on a daily basis is that we can never underestimate just how far investors can take a market to an extreme. The current trading action in stocks suggests a bullish stance, but, at the same time, we have an economy and fiscal situation that still aren’t that great. The trend is often your friend in the equity market and the main market averages could do very well going into 2011, perhaps even get ahead of themselves.

What I want is a major correction in precious metal prices. I don’t think we’re really going to get one. If we did, this would be a most opportune entry point for new positions. As I say, I would buy the index in this market, but there isn’t a lot of great value out there on an individual basis.

The mining industry continues to be flush with cash and is one of the greatest sectors for speculative investors right now. This bullish industry trend is going to be here for a while and it would be worth your while getting more up to speed on the industry if you want to be trading these kinds of stocks. As we’ve seen before in the technology sector, the mining industry is now experiencing a well-deserved renaissance. There are fortune-making opportunities in this sector at this time.

I can’t help but feel that the stock market is coming to a point of reckoning. We need to hear from corporations about the fourth quarter. There is solid potential for significant upside in equities over the next several months, even with an irresponsible monetary and fiscal policy backdrop. But, the broader market is due for a correction. The big question is: when will it happen?