Market Trend Update: Market in Neutral, Some Sectors in Overdrive If you're frustrated about the indices being right back where they were in November, that's understandable. A couple of weeks ago the market looked like it was going to break out of its rut. Then, it didn't. It's just moved sideways for weeks now.  However, not every stock is flat - that sideways movement is merely the average performance of all stocks. We've been seeing some trade-worthy divergences among the major sectors, with a handful of standout industries moving into the limelight.  We'll 'drill down' into those groups today, and follow up with a detailed look at the broad market's charts. After all, three out of four stocks move the same direction as the market does, so making the right market call is more than half the battle.    Sectors The idea here is to keep the proverbial wind at your back.  For instance, you may have found a great basic materials stock. However, if the broader basic materials sector is still sinking, the undertow has good shot at pulling that stock with it. (William O'Neill suggests 40% of a stock's prove movement is a function of its industry group's movement.) With that in mind... Technology and healthcare are doing quite well. In fact, they're the only two sectors (large cap, anyway) to boast any gains over the last four weeks. Technology stocks gained an average of 5.7%, and healthcare gained 3.6%.  Not enough of a gain to worry about? It's a matter of perspective. Considering the S&P 500 fell by 2.0% over the same period, and that it was only a four week period, finding those hot spots is worth the effort... particularly if the divergence is sustained for a few more weeks. Of course, to get more out of the modest rallies from technology and healthcare you'd want to find one of the stocks that were actually leading the rally - the 'best of breed' so to speak. You can rest assured those stocks have gained much more than 5.7% or 3.6%.  As for the laggards, financials, consumer discretionary, industrials, and consumer staples stocks are under fire. They're down 10.0%, 5.8%, 5.7%, and 4.6% (respectively) for the last four weeks. And, like the best stocks in the best sectors, the worst stocks in the worst sectors certainly posted even bigger losses than that. At the very least, 'long only' investors would be better served by not being invested in those underperforming sectors until they started to perform again. Better still, some of those groups - the financials in particular - would have been fantastic short trade or put option candidates.  For some investors, knowing which sectors are leading or lagging is enough information to make good decisions. For other investors, more gains can be squeezed out of the market by drilling down into a sector to find the individual industries driving those bullish or bearish sector trends. The outcome is still ultimately an individual stock pick. But, when it stems from the strongest sector as well as the strongest industry in that sector, it could be considered the 'best of the best of breed'. Since we have the time and ability to do so today, let's go ahead and explore some individual industries that look really strong, or really weak. Many are quite consistent with the bigger-picture sector trends. A handful, however, are surprising.    Industries Water utilities, wireless, investment banks and brokers, biotech, and coal are doing well. All of them may hold better-than-average bullish opportunities for the foreseeable future.  Biotechnology is the bulk of the reason the healthcare sector has been so strong. All of the other strong industries, however, have made big gains despite little help from their particular sector. (You could somewhat make the case that the 'industrial' sector and the 'metals' industry somewhat move in tandem, but how do you explain the strength from the 'brokerage' industry when the 'financial' sector is getting trashed?) That said, those disparities are the very reason you'd want to go to the trouble of doing a detailed industry analysis. You don't have to look too hard to find investors who are steering clear of anything in the financial sector right now. Yet, if they had been paying attention, those same investors could have made some big money off of Morgan Stanley's (NYSE:MS) 129% gain since November's low. That's more than a little chump change.  Footwear, home improvement, food retailers, thrifts and mortgages, and tobacco are the big laggards of late. The only one of those that's not a surprise is thrifts and mortgages.  Something interesting about a couple of those groups.... tobacco and food retailers are supposed to perform better in a recession. Everyone eats no matter how rough the economy is, and nobody really gives up vices like smoking, right? That's the theory anyway, but the theory sure hasn't helped investors who actually made that bet. That's one of the other advantages of keeping tabs on all the hot and clod spots - it can keep you out of trouble. Anyway, just be leery of those five industries until they've proven they're healthy again. They may offer some great short trades in the meantime.    The Overall Market In the final analysis, very few industries can actually overcome the market's broad undertow. Doing the industry-analysis above can certainly spot the ones that are able to buck the marketwide trend, but it rarely makes sense to go against the grain. So, getting a bead on the market should be your primary task. That said... Friday wasn't a particularly encouraging day. However, for most of you reading this right now, you're probably enjoying the reason for that weakness... the market is closed for President's Day today. Investors just haven't been big fans of being stuck with stocks over a three-day weekend, hence the selloff. I wouldn't worry about it too much just yet. The real key to it all - for the S&P 500 anyway - is the continued support around the 805 level. That was roughly Thursday's low, the low from early February, and January's lows as well, approximately. As long as that line holds the market can stay in the hunt. On the other side of the fence is resistance. The S&P 500 has to hurdle 879 to really inspire any new buyers. The 919/945 zone needs to be topped to say the market has done anything really worthy. However, that move would push the index above a recent short-term top and onto new multi-month highs. Bottom line - Enjoy the day off from trading, and don't sweat Friday's pullback too much. In the meantime, keep an eye on those industry charts.    Cogent, Inc. Being Removed From Our Watchlist Sometimes you just have to say goodbye. Take our coverage of Cogent Inc. (COGT) for instance. We've been watching Cogent off and on for several months, and though the company has been consistently profitable during that time (a period when very few companies were profitable to any degree), the stock just hasn't responded. In fact, the stock is now back to where it was in early 2008. Lots of volatility, but no net progress.  We still like the company, and any company with a market cap of only $960 million that's sitting on more than $400 million in cash is impressive. But, we just can't devote time and resources to this idea ... not when there are other stock trading ideas out there that are actually going to move.  If things change in the future we're certainly willing to revive the company's profile, and start trading the stock again. For now though, we've got to focus on other stocks. We're putting Cogent on the shelf to make room for fresh trading ideas.        ICU Medical Inc. Short Trades Should Now Be Covered The ICU Medical Inc. (ICUI) short trade has served its purpose for us, acting as a hedge against our long position in its competitor Edward Lifesciences (EW), and really acting as a hedge against all of our long trades. Now we just don't need or want this particular hedge anymore. So, we're going to remove this short trade from our list of open trades. Some traders would argue that ICUI's third encounter with resistance around $35.00 would be a reason to stay in; if that resistance is as strong as it looks, then the stock is presently poised to move lower again. That's a valid point too. However, since the stock has started to define a ceiling at $35.00, it's also made a long string of higher lows ... a subtle bullish hint. Persistence breaks resistance, so they say, which is why we're getting out here. It's not that we're sure ICUI is going to break above $35.00 - the resistance line may indeed hold up. It's just that we don't need to take the risk. There's not enough of a reward at stake, even if ICUI falls. There are far better uses (higher risk/reward ratios) for this capital, so we'll seek those hedges out instead. We suggest you cover any open short positions in ICU Medical Inc. Click here to see a chart.