Energy Stocks Return to Sting the Optimists By Rev Shark RealMoney.com Contributor 5/16/2008 10:30 AM EDT

A lot of folks were feeling wildly bullish last night after a late-day ramp in the indices. The attitude was that this is confirmation that the worst is over and that it's clear sailing from here.

I certainly have my doubts about that, but what this market really needs right now is sector leadership. Yesterday we saw some "old" technology names like Intel (INTC) and Cisco (CSCO) drive the market as oil and the "weak dollar" cyclical plays struggled. This morning we have just the opposite. Oil, gold, steel, etc., are flying while the chips, retail and financials struggle.

If you made the rotation out of energy and into technology and retail yesterday you are getting hit today. And this isn't the first time that has happened. We have been constantly teased by the potential for a rotation out of energy and cyclicals, but just when it looks like it may gain some steam, they trade up sharply again like they are doing this morning.

Many of the best traders I know are struggling to stick with the hot sectors of the market and are having a difficult time because of the volatility. The rise in the broad indices is covering up what is really going on out there, as far as investors trying to find what is working in this market.

We sold off fairly hard after a slight gap open. I suspect with option expiry today that the action will stay fairly contained. I continue to do some short-term trades and am wary of further upside.

At the time of publication, DePorre had no positions in stocks mentioned.

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James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.

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