The wild ride continued today, with the bulls following through on yesterday's modest advance this morning, but struggling to hang onto those gains by the end of the day. Like we told you yesterday, there's room for the market to climb even further without actually snapping back into an uptrend. The market proved again today it's not ready to be bullish. We'll look at the chart in a second. First I want to deliver what I promised to you earlier in the week... a bird's eye view of how the market's key sectors are valued and growing, and perhaps just as important, how the key sectors are poised to perform. Numbers Don't Lie We could write a novel on sector-based trading and investing. Don't worry though - we'll keep this super-short and get straight to the key points. The only preface we need to insert here is that this is a bigger-picture and longer-term point of view. (Surely you're not using all your investment dollars for short-term speculating, right?) With that, we'll let the data do most of the talking here. First and foremost, let's look at recent and projected earnings growth for the market's ten key sectors. As you'll see, the financial and consumer discretionary stocks were the only areas that did really, really well last quarter. Both are expected to do quite well in the foreseeable future too. Granted, a lot of sectors are projected to do exceedingly well in 2014 (like materials, technology, and healthcare). The financials and consumer discretionary names are the only ones that have actually proven they can do well, however, so I'd take the other lofty projections with a grain of salt. On something of a side note, while I know the Q3 and Q4 bars have been set pretty low because the year-ago profit comparisons were a disaster, don't the earnings growth estimates for the current and coming quarter still look oddly high for most industries? Side note #2: If you want consistency, stick with industrials and the consumer discretionary sectors. They may not be red hot, but reliable growth is better than a big-but-unattainable growth target. Of course, strong earnings growth doesn't mean a thing if you have to pay a small fortune to participate in it. How are the key sectors looking on a valuation basis? Amazingly, the financial sector is the second-lowest priced sector on the table for 2013. Ditto for 2014. The only cheaper sector is energy, on a trailing as well as a forward-looking basis. Honestly though, I don't know if I'd rely on the big growth projections making the energy sector so cheap on a forward-looking basis - the sector's burned us all before. Take a look. Another area I'd be willing to tiptoe into (selectively) based on its overall valuation is the tech sector. You and I both know there are pockets of problems there, but there are also pockets of opportunity. And, with a forecasted valuation of only 12.65 times 2014's earnings, there's plenty of room for upside in the technology sector's stocks next year. On the flipside, the utility companies are overpriced on a trailing as well as a forward-looking basis. Everything else is in line with long-term norms in terms of valuation... for the time being anyway. Bottom line: You may want to overweight financials, discretionary names, and technology stocks going forward, into and through 2014. Conversely, with the exception of water utility names, you may want to underweight the utility sector. Now, like we explained to you above, this is long-term information that should help guide you through long-term decisions. That doesn't mean we can ignore the short-term ebbs and flows thrown our way from one day to the next. What do we need to know right now about sector leaders and laggards no matter what our timeframe is? Just this: Though each to varying degrees, three out of four stocks move the same direction as the market does every day. In other words, even the stocks from the top sectors are still going to suffer in the short run if the market rekindles its pullback. I make that point so you would believe what I'm getting ready to tell you - I just looked at 200 different industry (not sector, but industry) charts, and there are only seven areas I'd be interested in putting new money into ...automobiles, biotech, commercial vehicles and trucks (and trucking), forestry products, casinos, industrial metals, and oil & gas equipment. Everything else is either overbought, selling off, or both. And it's got nothing to do with value. It's just the season and the market's mood. We're in a summertime funk, and in a lethargic time of year. I wasn't kidding when I told you a few days ago that August and September are, on average, the worst two-month stretch for the year. It's no fun, but to savvy investors, the pullback in stocks and sectors that are looking good in the grand scheme of things is ultimately a buying opportunity. At this point you're probably wondering if I'm going to give you a new stock pick, if not to take advantage of the bigger sector-valuation trend, then at least a pick to capitalize on the near-term uptrends from the likes of biotech, trucking, or the industrial metals arenas. I'm not. As is frequently the case, I just don't have time or room to dissect another new idea after painting the bigger picture today. If you want to take these overarching sector themes to the next level though, the guys over at the SmallCap Network Elite Opportunity are experts at turning concepts into individual stock selections. Just for the record, the SmallCap Network newsletter [what you're reading now] is written 100% independently of the SmallCap Network Elite Opportunity newsletter. Yet, it's amazing how often they see and think the same things we discuss here in this publication. Great minds think alike? Maybe. Or, maybe it's just that John Monroe's team and my team both make a point of finding our own fruit-bearing ideas, rather than just regurgitating everyone else's opinions and picks. Since there are only a few really good ideas at any one point in time, it's inevitable that we'll cross paths every now and then. Whatever the case, if you want good stock picks and don't feel like ferreting out the best of the best in the sectors I highlighted above, I'm willing to bet the SCN EO will be finding those stocks for you soon, and pinpointing the best time to jump in. If you're still not sure, I suggest you use the free two-week test drive just to see how the Elite Opportunity service can make you a more potent trader. Here's how. Or, copy and paste the following link in your browser: http://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=SCN+Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/ Again? I don't know how many times I've said this to you the last few weeks, but I'm going to say it at least once more... the one thing worse than a market that's not rallying is a market that tried to rally but couldn't keep it going. That's what happened today, reinforcing just how tall the hurdle ahead is. People are going to look at today's chart, realize stocks just don't have it in 'em right now, and decide to not even bother trying to jump in again until we get a nasty (though capitulatory) bottom. I can quantify the idea on a chart, if need be. Heck, I can quantify it on two charts. Just for the sake of consistency I'll look at the NASDAQ Composite's chart again today. Besides, it's worth showing you exactly how my worst fear for the NASDAQ was realized on Thursday. All it took was a brush of the 20-day moving average to send the buyers back-pedaling. There's still a glimmer of hope with the Composite. The support level at 3576 is still intact, and until it fails we can give the market some benefit of the doubt. But, between the minimal volume behind the rally today on top of how and where resistance was found, I think the odds continue to favor more downside. The chart of the S&P 500 tells the same story, though perhaps to more of an extreme. The S&P 500 peeled well off its highs for the day, not unlike yesterday. Take a look. When push comes to shove, the bulls aren't shoving nearly as hard in the afternoon as they are in the morning... when they don't have to commit to holding a trade overnight. For both charts we're seeing the volatility indices inch their way upward, whether or not the underlying index makes a similar downward move. The VIX is a better barometer of investor confidence than stocks are in this environment, and right now, the VIX is saying traders are more cautious than optimistic. That makes for a bearish undertow. For what it's worth, this weekend is a three-day weekend (Labor Day), and many traders turn it into a four-day weekend. And, a few of the luckiest traders manage to turn it into a four-and-a-half-day weekend, meaning they were out the door well before the closing bell rang on Thursday. That may have something to do with the low volume and intraday fade. Still, the shape of the chart is a glance into the mindset of traders right now, and that mindset isn't exactly bold and bullish. If the S&P 500 closes under Wednesday's low of 1627.47 tomorrow, it's going to make it real tough to get the bulls motivated again on Tuesday. So, let's check in on things tomorrow, shall we?