Market Comment 10 28 2011

For the last few weeks I have scaled back into "risk on" style positions. My first move was to become fully invested in our Flexible Income folio, taking positions in junk bonds (JNK), preferred stocks (PFF), Corporate Bond LQD, and convertible bonds (CWB). Next, I took a position in the S&P 500 (SPY) in the Discretionary Folios. And finally, I went 100% long in the Sector Rotation Folio. I took 25% positions in each of Energy (XLE), Materials (XLB), Industrials (XLI) and Consumer Discretionary (XLY) sectors.

FOLIOfn accounts were well positioned for yesterday's huge rally. At this point the market is overbought and due for a pullback. I will add more equity postions on any meaningful pullback.

The returns in October have been historically high. Extreme volatility kept most sensible people out of the market earlier in the month. This rally, while attributed to European  news headlines, was really due to extremes in fear and bearishness on the part of investors and fund managers alike. When investor sentiment reaches extremes a reversal can be forthcoming.