Beware the Ides of March

March has been a cyclical low point for the markets. Oil transports, big oil, energy, raw materials, homebuilders and most commodities seem to be overextended after their recent parabolic run ups. Just look at the HGX (homebuilders index), OIH (oil holders), XOI (oil index), XLE (energy spider) and the CRX (CRB index), these have gone straight up, not a normal thing.

These sectors comprised of a small group of oil stocks, basic materials shares and homebuilders have supported the entire recent market run up. If not for DD (Dupont), XOM (Exxon/Mobil) and CVX (Chevron/Texaco), the DJIA would currently be at its January lows.

The markets (Excepting the Nasdaq) are flirting with new 52 week highs. They will either break through to the upside with conviction, which would carry the market higher; or they will bounce back off the resistance at this level and first head south to the next support levels.

Unlike the Santa Claus rally, which had 20% of the stocks supporting the market, this rally is not broad based and has very thin legs supporting it, not a good setup. If these stocks and sectors start to pull back (which we have seen in the past few days), we could see a major market correction in the near term.