The S&P 500 was up 1.8% last week, this is the second week of gains for the major index. Cyclicals and Technology lead the way as retailers turned in better same stores sales during the month of October. Utilities got beat up a little, but the rebound in TXU's shares helped the sector today.

We experienced a jump in the IA portfolio as Wal-Mart (WMT) and Best Buy (BBY) put on nice performances.

ECONOMICS

The Fed raised short term rates 25 basis points for the 12th consecutive time, raise the fed funds rates to 4%. This Thursday, the trade balance report will be released, and it will be interesting to see how the market reacts if the trade deficit continues to climb.

TRADING RANGE

From current levels, the market (S&P) has the potential to trade toward the upper end of its trading range (1250-1300). This would represent another 3-7% upside.

SECTOR PERFORMANCE (S&P 500)

Sector 1 Mos 3 Mos 12 Mos 5 Yrs

Financials 5.3 2.9 6.6 1.3
Materials 2.9 -2.3 0.9 7.9
Industrials 1.5 0.1 2.5 -0.9
Cons. Descre 1.2 -5.2 5.5 0.9
Info. Tech 1.2 -0.9 5.6 -13.8
Telecom 0.2 -5.1 -3.2 -12.9
Cons. Staples 0.0 0.2 5.5 2.0
Healthcare -2.7 -3.3 8.7 -3.0
Energy -3.8 1.3 34.1 9.9
Utilities -7.3 -3.9 18.3 -4.6

The above numbers speaks volumes about the importance of having a strategic sector rotation plan in place. I am currently back testing a sector rotation strategy dating back to 2001.

The preliminary results are nothing short of phenomenal. In the months ahead I will be posting the results of our back test, and after we complete our research, we will be providing a subscriber based newsletter. I'll keep you posted.