Good afternoon fellow small-cappers. For those of you who were still in it, I hope you locked on the nice triple-digit win on U.S. Precious Metals (USPR), per yesterday's alert. Money is a wonderful thing, especially when it's scraped up in this tepid market environment. Speaking of.... I'll say this much for the bulls - they're persistent. We talked to you a little yesterday about how the market was vulnerable to a pullback here in the shadow of what's now an 8.0% rally; all we needed was a shove in the right direction. After stocks slipped into the red in the middle of the session ion Monday I kind of thought that might be the catalyst. By the end of the day though, the buyers were fighting back and the indices ended up healing most of their intraday wounds. The market's fighting again today. So, we clearly can't count it out yet. The flipside: There's still something strained about the market's strength at this point, and I've still got a feeling we're approaching a near-term top. Pair the overbought status (following the 17% runup since mid-August) with the fact that we're now entering a slower time of year for the market anyway, and what you get isn't the same kind of explosive market we've gotten used to over the last few months. Fear not, however - there's a way around the brewing springtime lull. Time to Get Focused We talk about it with you when it really matters, but tend not to talk about when it's not that big of a deal. Well, it's getting ready to be a big deal. What's that? A sector-based approach to trading. Since we're about to enter a slower (though still generally bullish) time of year, if you're looking to keep on squeezing out superior gains, you're going to have to focus on the best of the best sectors and industries. See, 40% of an individual stock's movement has nothing to do with the individual company itself - it has to do with the sector or industry the stock's in. In other words, find the right sector, and the battle is half won. So what's the top sector to own for the slow market in early 2012? Life sciences, aka biotech. Life sciences is a funny breed. It trades independently of the market, but more than that, it trades hot and cold.... very hot and cold, to be precise. If you catch the tail end of the cold phases and the beginning of the hot phases though, you can make some ridiculously-big money. Take the period between late-2003 and late-2005 for instance. Between November of 2003 and the middle of 2005, the life sciences sector's performance as well as the S&P 500 were pretty well even - both gained about 12% between November of 2003 and May of 2005. Then in May, something happened - biotech just got catapulted. Between May of 2005 and November of that year, the biotech sector gained 32% while the S&P 500 barely gained 7%. We saw the same kind of thing happen in mid-2008, when life sciences stocks soared 22% while the S&P 500 fell back by 8%. Those are huge differences... ones that are more than worth trading. Well folks, I think we just began one of biotech's hot phases. The biotech sector and the overall market have pretty much been walking hand-in-hand since the July peak turned into August's decimation. Things have really started to change since late December though, when biotech started a rampage that's still in motion. In fact, based on prior life-science divergences, I've got a feeling this period of outperformance is just beginning. Why do I think that? Because the underlying reasons for biotech's strength in 2005 are starting to emerge again - a truckload of M&A activity, which once is in motion becomes a freight train you don't want to step in front of. Snowball We've already seen several acquisitions in recent months in a couple of different life science arenas. Bristol-Myers Squibb acquired Inhibitex earlier in the month in order to get its hands on INHX's hepatitis C developmental drug. The move translated into a 140% overnight gain for Inhibitex shareholders. That acquisition followed Gilead's acquisition of Pharmasset in November, which was also an effort to get into the hepatitis C game - VRUS has a good Hep-C treatment in the works, and the stock nearly doubled overnight as a result of the buyout. Two hepatitis C buyouts in two months? That was all the market needed to start bidding all the remaining hepatitis C stocks up, since in-development Hep-C drugs were getting harder and harder to come by. Were it just the hepatitis C market being affected, it could have been dismissed. The M&A mentality moved into other life science area though.... like gene sequencing. Roche is jockeying to get its hands on Illumina (ILMN) for its genetics research platform. It only took a couple of other minor buyouts in the genome mapping space to put all of the gene sequencing stocks into orbit as well. To see one big acquisition or even just a couple in one area of biotech is one thing. To see three major buyouts spanning a couple of different segments of the life sciences sector, however, is another thing - it's a sign of the times. Now that the life sciences M&A ball is rolling, it's not apt to stop anytime soon. Now, I said all of that for a specific reason... Tune In Tomorrow I mentioned it yesterday but it bears repeating today. We've got not one but two new Featured Stocks from the life sciences area in the lineup. I've thoroughly reviewed them both, and simply love them. While I can't (and wouldn't want to anyway) specifically say either are buyout targets, it wouldn't shock me to see one of them - if not both - snagged. That's not even necessary though. Like I said above, biotech as a whole is heating up right now, and mere speculation alone is enough to draw a strong buying crowd. As it turns out in both of these cases though, they're each just great companies to own on their own. We're going to do something a little bit different this time around though. Rather than just flip a switch and call it a Featured Stock at the site and then send out the newsletter about it, we're going to first inform our readers about it though the newsletter. That'll be sent tomorrow morning. Then later in the day on Wednesday we'll make it an official Featured Stock at the site. That way, you loyal readers will get something of an advance notice about the company. So, keep your eyes peeled for tomorrow morning's edition. It's gonna' be fun.