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NEW YORK (TheStreet) -- The question on many of my clients' minds is whether or not this rally is sustainable.


S&P 500

is up about 21% over the last 12 months, and people are still cautious and even negative. Yet, the markets remain resilient. Global policies and QE3 have strongly heightened the difficulty of short- and intermediate-term fundamental analysis, and the fiscal cliff is being ignored.

In my opinion, the future is foretold by four variables: Spain, Earnings, Employment and Interest Rates.

With respect to Spain, I think it was summed up neatly by Jon Markman's first paragraph for an Aug. 1, story about Europe: You can't Spell "Spain" without "pain." To wit, the country's yields have fallen one to 1.5 percentage points, and the only thing holding them back from falling more is assuredness that the European Central Bank will get involved.

But time is running short, and with short time usually comes overreaction in the market. I anticipate Spain to get a bailout soon, and if that bailout is for more than ¿100 billion, I expect a sharp sell-off in the markets.

When the Oct. 5, employment figures came out showing a dip in unemployment to 7.8%, former

General Electric

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chief executive Jack Welch openly cast doubt on the numbers. "Can't debate, so change the numbers," he Tweeted.

Whether or not you believe the numbers, they are not giving us a great view of where we are headed down the line. They need to improve for the market to improve. This is not news, per se, but it is worth saying again within the context of other important variables.

The interest rates grabbing the market's attention right now include mortgage rates and key rates in Europe. Remember, the housing market started the recession and Europe prolonged it. But the discussion of rates is almost irrelevant. What's germane is lending. Without banks making loans, and individuals and businesses putting the capital to work, it's going to make meaningful inroads on employment and GDP growth

Unemployment, Spain and interest rates are important catalysts for the market. But the most influential short-term factor is earnings. For now, low expectations are helping companies beat forecasts. Yet despite these lower expectations, top- and bottom-line misses along with fourth-quarter warnings remain abundant. If/when analysts lower their expectations more, I believe the markets will react sharply and negatively.

To me the outlook on these four key variables -- Spain, interest rates, earnings, and employment -- is more negative than positive. Accordingly, I'm advising investors to take profits when the markets are rallying.

Secondarily, look into sectors that are more defensive and impervious to sentiment. I like telecom.

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has a delicious 5.40% yield. I also like consumer discretionary (

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is a favorite), and health care (we like

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As I have said before, go to the strong balance sheets and reliable revenue stream.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Oliver Pursche is President of Gary Goldberg Financial Services, a boutique money management firm located in Suffern, NY. Additionally, Mr. Pursche is the Co-Portfolio Manager for the GMG Defensive Beta Fund, and a Founding Partner of Montebello Partners, llc. In his role as President of GGFS, and as a member of the GGFS Investment Committee, Mr. Pursche helps oversee the investment portfolio of over 2000 clients with over $500 million dollars in assets. Mr. Pursche frequently provides market and economic commentary on CNBC and Fox Business News, as well as often being interviewed by The Financial Times, US News and World Report, Thomson Reuters, Bloomberg Businessweek, and the Associated Press regarding his and the firms views on the latest market news and events. Mr. Pursche's views on the market and investment strategies have been featured in the Wall Street Journal, Investors Business Daily, Smart Money, USA Today and other national business publications. In addition to writing for, he is also a weekly contributor on and His daily market commentary can be read at

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