This past week brought in "clear view" the under the surface rotation that has been occurring from the technology sector into the healthcare/pharmaceutical sector - and thus we think it important to look at the Pharmaceutical/Semiconductor RATIO. That said, this "repositioning" is extremely important in our overall equity viewpoint; in the past it has coincided with significant shifts in the overall sentiment of stocks to defensive or negative - as a change in risk aversion develops.

This point is quite clear at the Sept-1998 peak, at the Feb-2000 low, and at the Sept-2002 high - each corresponding with a change in trend for the stock market. Hence, we find it extremely important at this point given it is nearly universally thought that stocks correcting to move higher. If this pattern holds, and it still is not clear - then a topping pattern of proportion is developing...that could last several years if past patterns hold.

The bottom line - if you are long - you want to be cautious and consider defensive issues; and if you are inclined to be short...then technology rallies are to be sold, and to be sold aggressively.


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