As crazy as it sounds, I have a confession to make; I'm reveling in the market's current confusion.  I know, I know....it can be maddening at times. On the other hand, you know as well as I do it's times like these - when everyone else is hysterical - that lead to big opportunities for those who (1) have the data and tools to understand what's really going on with the market (the 'big picture'), and (2) can keep their heads cool and their perspective grounded.  And what's that perspective suggesting now? I'm not going to mince words here - I'm a short-term bear (looking for a near-term correction), but still a long-term bull (looking for a relatively quick recovery). I'll tell you why below.  Perhaps more important, I've got a few specific sector and stock trading ideas on deck I think will take full advantage of that recovery move once it ignites.    3 Stock Picks, 2 Sector Outlooks, 1 Market Call No, it's not a goofy version of the Twelve Days of Christmas - it's a description of what I've got in store for you today.  For those of you who've been reading the Small Cap Network newsletter for at least two or more weeks, you'll know we recently launched our premium service called the Rhino Report (www.rhinoreport.com). I have to be honest here - while you hopefully find the Small Cap Network newsletter to be helpful, the Rhino Report's guidance is soooo much more robust...not to mention timelier.  Though I have to reserve the bulk of the 'good stuff' for Rhino Report subscribers, part of today's top-down look at the market and trading ideas come from recent editions of that newsletter.  Let's just dive in, starting with the broad market.  Market Outlook I could cite about a dozen different reasons why stocks are more likely to pull back from here rather than continue the bullish romp. I really only need one though, as it pretty much sums up the rest - volume. Well, to be specific, it's a lack of bullish volume and growing degree of bearish volume, though the fading momentum isn't a bad clue either.  On the surface this is almost imperceptible. Tuesday's selloff drew out a lot of sellers, and we've yet to see any buying volume rival Tuesday's spike. Overall though, it's not like it's been hyper-clear the tide is turning. To come to that conclusion you need some information that isn't readily available to most. (Remember above when I mentioned "it's times like these that lead to big opportunities for those who have the data and tools to understand what's really going on with the market"? Yeah, well, this is what I was talking about.)  While the total volume may not appear to be all that bullish or bearish, when you break that volume out into the NYSE's 'up' volume and 'down' volume, you get a clearer picture.  How so? The nearby chart says it all. The bearish volume ($DVOL) is trending higher, while the bullish volume ($UVOL) is trending lower.  That said, this is a wobbly trend so far, so it's not like I'm married to the outlook. On the flipside, I do know that once these up/down trends tip their hand, they generally follow-through. We'll probably have a firm answer within three days, but I think the bears are ultimately going to win this battle. Either way though, know this is a short-term view. When I stretch out these trend lines (moving averages of up volume and down volume) and tweak the analysis of them, we've actually got a bigger-picture bull trend still underway. Of course, the time question is the bulk of the headache for investors.  Many traders can accurately spot new market directions; the tricky part is figuring out durations. How long should we plan on bearing bears? Do the buy-and-holders need to worry about it? That's the point - when Nouriel Roubini is saying 'sell' and James Altucher is simultaneously saying 'buy', they don't offer any idea of duration for their calls.  One of the key components of the Rhino Report timing service is recognition of multiple timeframes.  You caught a glimpse of the short-term timing model above, though the up and down volume analysis as described here isn't exactly how we apply it. [Sorry, some things have to stay proprietary.] We also generate similar signals for intermediate-term and longer-term viewpoints. Today's short-term 'almost' bearish outlook was a freebie, though from here we'll at least follow up with that call in the SCN.  Rhino Report readers are getting the play-by-play, however, for all three timeframes.  Sectors/Industries I actually shared six specific sector picks (further broken down by market cap) in yesterday's edition of the Rhino Report. I can't share them all again today, but I don't mind hitting a couple of them. Just so you know, while the sector and industry picks appear to be technical in basis, that's not the only thing going on here. As with the stock picks, I'm looking for a combination of budding momentum and the right supporting fundamentals; every little bit helps.  One of the more interesting bullish groups I've come across - repeatedly - over the last several months has been small cap telecom. And to be clear, I specifically mean small caps, and not the large caps. If this pro-small-cap-but-not-large-cap-telecom theme rings a bell, there are several possible reasons.  One of them may be the fact that I told you last week telecom was poised to disappoint when it came time to report Q3 results (an outlook based mostly on the large caps in the group). Right on cue, Verizon (VZ) reported today that third quarter earnings had fallen by 25%. Ta-da.  Or, perhaps it was the last time I pounded the table on small cap telecom back on June 3rd. I hope you were listening: the S&P 600 Integrated Telecom Index is up 29% since then, versus the market's 10.6% gain. Or, maybe it seems familiar because I've made some really good money - about 28% - on MetroPCS (PCS) in my SCN portfolio after picking it based on my small cap telecom outlook. I'm not saying any of that to boast; I'm saying it to make the point that this sector and market cap thing is working. It always does, which is why I make such a big deal about it here at the Small Cap Network as well as over at the Rhino Report. In any case, there's still a lot of meat left on the bone here (as you can from the chart), particularly in the wireless arena. I anticipate adding a new telecom name to the Rhino portfolio (based on this outlook) sometime in the foreseeable future. This group is just to unloved and moving too well to ignore now.  The other industry of interest right now is commercial printing. Boring? Yeah. Obscure? Yeah. I swear though, I've made most of my money in the stock market by digging up the obscure stuff you never hear about from the media. Commercial printing definitely falls into that category. More important, these stocks are on the move. In many ways it's a stealth recovery play. As business confidence grows slowly but surely, the need for packing, labels, and documents will continue to swell. Nobody really sees it though.... it's a little too obvious. I don't have any holdings from the industry yet, though a couple are in mind.  From the Watchlist  Here's a quick explanation of how the stock-picking works in the Rhino Report.  I've got two separate sections of the newsletter devoted to individual stocks. One of them is the actual portfolio, where I've officially recommended a stock, and am tracking it - and its gains or losses - for you until I specifically recommend an exit.  The other section is a watchlist, where I park all of my potential stock purchases for a few days before pulling the trigger. This gives you a chance to review them on your own, and gives me time to wait for a key technical or fundamental development; I like to shop around and wait for ideal entry spots. Most stocks never make it off the watchlist and into the portfolio, but that's ok - you only want the best of the best, right? It's better to have too may ideas that you don't need to rush, than to not have enough ideas and end up plowing into a stock you didn't really do enough homework on. Now, I explained all of that so it would make sense when I told you these three stocks are currently on the watchlist, but not in the portfolio. You can take them and trade them for yourself (a lot of subscribers do anyway), or not. After all, even if they're only watchlisted for me, they're still quite compelling. I'm just going to focus only on the top ideas I find for the Rhino's portfolio though. The first one is Cadence Design Systems (CDNS). This is really a tech-stock turnaround story. Like most industrial software designers, Cadence took its lumps during the recession. After four straight earnings 'beats' though, I think the market needs to start accepting the reality that things are getting better here on the earnings front.  Another one is RTI International Metals (RTI). This stock recently pulled back, but as it has so many times in the past, it caught itself at a higher low, and started to work its way upward again. The problem here is a sky-high projected valuation, though some huge beats over the last two quarters may mean the forecasted P/E is simply too big.  And finally, OmniCell (OMCL) - a healthcare technology name that looks (and is) expensive no matter how you slice it. But, as the mandated healthcare reform approaches, companies like OmniCell are going to see demand pick up. I'd also be kidding up if I said today's bullish outside day reversal wasn't tempting.  Notice in all three cases we've seen some impressive technical momentum. We just need a couple of more things to fall into place before I can officially recommend any of them.  Like I said, I don't know if or when I'll be adding these two names to the official portfolio; you have to be a subscriber to get that kind of guidance anyway. Besides, we don't want to step in at what appears to be a short-term top for the broad market. (That's the whole point of doing the timing analysis above.)  I will tell you this much though.... I've got eleven more names on the watchlist that look just as trade-worthy. The watchlist alone would have some traders salivating.  Anyway, you get the idea. The market call, sector forecasts, and stock picks above are my gift to you... sort of a teaser. You can have them gratis, whether you enroll as a Rhino or not. If you want the whole shebang though - all the good stuff - on an ongoing basis, I recommend you check out www.rhinoreport.com. There's even a risk-free trial for SCN newsletter readers, so there's really no reason to not give it a test drive.  Helping you get more out of the market, James Brumley Editor - Small Cap Network    We Value Your Feedback Got comments, questions or suggestions? 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