Market Comment: The U.S. equity market was held hostage by the House, Senate, and President as they played a high stakes game of chicken with the U.S. and world economies. Now that they have come to a compromise the market should move its focus back to what’s most important, the strength of the U.S. economy and corporate revenue and earnings growth. For most of the year, the stock market has held up beautifully, electing to focus on the health of America’s corporations instead of the dysfunctional nature of the U.S. government in Washington DC. The market has been trading in a relatively narrow range for most of the year. The next big move will be dictated by the direction of the economy and the outlook provided by corporate America. On that front, we are well into the second quarter’s reporting season and so far a large number corporations, both large and small, have reported much better revenues and earnings than anticipated and are giving very optimistic outlooks for the rest of the year and 2012. As of the end of July, 72% of companies that reported beat views for the quarter. While the economy is improving, we have a long way to go before we can be very optimistic. The slowdown is not over yet. It will be very interesting to see how consumers and investors react once the government is no longer a cause uncertainty and concern. The stock market is currently at the lower end of the trading range. We will not put fresh capital to work until it retests the lows, holds, and starts on an upward trend again.

Sector Comment: Most sectors of the market are taking breathers after a robust move higher from the June lows. The medical device and product sector has held up well as the market turns more defensive. In software, within the enterprise software group, the “Software as a Service” subsector has had a meaningful correction after leading the market for an extended period of time. When pull-backs fall to significant areas of support, add to positions. Continue to avoid financials and broker-dealers. Click here to read more.