- Commentary -

December 2, 2009 (FinancialWire) (By Dr. Joe Duarte) — The S&P 500 SPDR ETF (NYSE: SPY) is once again knocking on the door of new highs from the March bottom but the Russell 2000 ETF (NYSE: IWM), where the small stocks make their home, is stubbornly lagging its larger cousin.

The pattern of money flows toward large capitalization stocks continues. Even though the market survived a scare after the Dubai jitters hit last week, traders are still confused. The two choices are pretty clear. Do we worry about the continuing technical divergences, such as the lagging performance of the small stocks? Or do we just continue to follow the leadership, which is clearly in the large cap stocks at this point?

The answer is actually both. If you remain aware of the current divergences in the market, you can trade the large cap stocks with more care while at the same time avoiding the small stocks.

To be sure, this is a risky trade. Yet, it’s not one that should be avoided altogether, given the fact that we are in a bullish period for the markets. In the short term, you have a couple of days left in the turn of the month period, where institutions put money to work at the start of a new month. In the longer term, say the next couple of weeks, you have the month of December, which is traditionally a bullish month for the market in your favor.

The key is to keep seasonality in the background. Yes, the odds are more in your favor than not. The mistake is to think that this kind of wishy-washy market can rally until the end of time.

Finally, it’s important to look at individual positions separately. If you’ve got big profits in some areas, this may be a good time to trim position. If something isn’t working, it’s time to sell it. More than anything, though, this is a good opportunity to trade, not to fall in love with anyone company or sector.

[Go to http://www.financialwire.net/?s=joe+duarte to see more commentaries by Dr. Joe Duarte.]

The FirstAlert(tm) Economics Calendar lists ADP Employment Report for November (8:15 a.m.), EIA Petroleum Inventories (10:30 a.m.), Fed releases Beige Book (2 p.m.).

The FirstAlert(tm) Events Calendar showcases AER at Morgan Stanley Transportation Corporate Access Day; ALNY, COV, ACOR, VRTX at Piper Jaffray Healthcare Conference; Argyle Executive Forum Leadership in Utilities Forum; ATK, HTZ, PENN, VTR at Bank of America and Merrill Lynch Credit Conference; BBV, SNY at Societe Generale Premium Review Conference; BTE, NXY, TGA, ROSE at CanaccordAdams Global Energy Conference; CLR at Jefferies Energy Summit; CSX at Wolfe Research Transport Regulatory, Infrastructure, and Labor Conference; CWT, AWR, MSEX, CTWS at New York Society of Security Analysts Water Utility Conference; DWA 2009 Analyst & Investor Day Webcast; EPD at Merrill Lynch Global Energy Large Cap Conference; EXPE, LOGI, TSRA, URBN at Nasdaq OMX Investor Conference; GKSR, PRO, ASH, MLNX at JPMorgan SMid Cap Conference; GSI, GTI at Goldman Sachs Steel Forum; IBM, SYNA, BRCD, DELL at Credit Suisse Group Technology Conference; LDSH, NOC, HRS, UTX at Credit Suisse Group Aerospace & Defense Conference; MOS, MON at Citigroup Global Markets Basic Materials Conference; NOK Capital Markets Day 2009; PTNR at UBS LATAM – EMEA Investor Conference; SBNY, NFX, DFG, HON at Friedman Billings Ramsey Capital Markets Investor Conference; SPR, CLR at Bank of America Merrill Lynch High Yield Conference; XEL Investor Meeting.

FirstAlert(tm) Website of the Day: http://www.realsimple.com

Quote of the Day: “Painting is the art of hollowing a surface.” Georges Seurat

Today is: Special Education Day.

Happy Birthday: Charles Ringling, Ray Walston, Alexander M. Haig, Jr., Edwin Meese, Gianni Versace, Lucy Liu, Monica Seles, Britney Spears.

Today in History: U.S. President James K. Polk announced to Congress in 1845 that the United States should aggressively expand into the West. Napoleon III became Emperor of France in 1852. In a New York City theater, British author Charles Dickens gave his first public reading in the United States in 1867. Following 19 years of Ford Model T production, the Ford Motor Company unveiled the Ford Model A as its new automobile in 1927. La Guardia Airport opened for business in New York City in 1939. A team led by Enrico Fermi initiated the first self-sustaining nuclear chain reaction in 1942. The United States Environmental Protection Agency began operations in 1970. At the University of Utah, Barney Clark, became the first person to receive a permanent artificial heart in 1982. NASA launched the Space Shuttle Endeavour on a mission to repair the Hubble Space Telescope

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