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Guard Against Complacency Despite Irrepressible Market

Scott Redler

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The market looked headed for another gain Monday before lunchtime hit and forced the market to digest. Stocks faded for the most of the afternoon, and major US indices finished just below the flat line, largely unchanged. In the 2013, flat is the new down. A confluence of factors--low interest rates, QE, a growing (albeit slowly) economy, among others--have pushed the stock market to historic highs, and there are no signs that is set to change anytime soon.

The Federal Reserve will once again be in focus this week as Chairman Ben Bernanke will testify in front of Congress starting Wednesday. The Fed's QE program divides opinion, but has undoubtedly left investors chasing yield in the form of equities, likely one of the central bank's secondary goals with its easing program.

While the market was quiet today, we continue to have tremendous rotation through sectors. The solar sector continued on its war-path today following strong earnings from JA Solar (JASO), which finished the day up 70.41%. Big solar players First Solar (FSLR) and Sun Power (SPWR) surged in sympathy with JASO earnings, gaining 9.82% and 7.74%, respectively. The Elon Musk effect also remains in full effect as the solar company he chairs, Solar City (SCTY), finished the day up 14.67% despite closing off its highs.

The precious metals, Silver (SLV) in particular, have also had an eventful 24 hours. Silver futures were down several percentage points last night after opening for trading, but were able to pare losses into today's open and then push higher during today's session. SLV finished the day up 4.11%, staging a very impressive comeback. The swings in Gold (GLD) were not as extreme, but the ETF went from opening flat to finishing up 3.12%. Perhaps the metals are anticipating dovish comments from Fed Chair Bernanke this week in his Congressional testimony, after a multi-week period of talk about QE "tapering."

Among the set-ups mentioned in today's Morning Call, Baidu (BIDU) made a very impressive move, finishing the day up 6.09%. We continue to see money rotate into lower quality stocks, with today's example being Molycorp (MCP), which is part of the once-hyped, but now-forgotten rare earth sector. MCP finished the day up 10.74%.

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*DISCLOSURES: Scott Redler is long AAPL, MCP, FDX. Short SPY.