1/11/2010 ... Tops take time to form ...

For some reason tops tend to take more time than bottoms to form. My guess is this occurs because bottoms occur on panic which comes on fast and furious, sort of like a hundred yard dash, whereas tops are drawn out like a long leisurely walk. That said tops don't occur when everyone keeps looking. They occur when no one cares, after everyone has been lulled into a sense of complacency brought on by the slow steady march of higher equity prices.  What's the current pulse on sentiment you ask ? Well it is not warm and fuzzy and comfortable, rather it is skeptical, doubting and in disbelief. Again these aren't the words associated with topping action. In 1999 the phrases "I am quitting my day job" or "this is a NEW economy" or "my son is going to be rich, he just got a job at an internet startup" Dominated the landscape.  Even in 2007 while the sentiment wasn't as bubble like as 1999 there still was a calm, a feeling that stocks had by birthright only one way to go - UP ! So while anything can happen we just don't see a major correction coming when everyone is concerned or cautious - it just doesn’t works that way !! However just because everyone is cautious doesn't mean you forget about market risk or risk management. We have come far and fast and exit strategies and stops should be in place. However we are just suggesting that you don't cut your profits short just because things have appeared to go too far, too fast ! In our years of following equities we have seen a lot of too far and too fast keep going ! It is when everyone embraces too far and too fast that one has to worry. Our best guess is that equities will track they way they did in 2004 to 2005 following the big 2003 rally, by entering into a wide protracted trading range. Beyond skeptical sentiment being a bullish indicator market breadth as measured by the number of industry groups and individual stocks participating (while moderating from levels just a few months back) is still strong. Best. FusionIQ Kevin Lane