It looks like everything is working in this market -- momentum and contrarian plays, big-cap and small-cap stocks -- but Aaron Task, co-executive editor at TheStreet.com told "RealMoney" radio show listeners on Wednesday that it's time to start thinking hard before chasing the market.

In this environment, fund managers will feel performance anxiety if they stayed out of stocks, Task said, because they're way behind their benchmarks if they're sitting on cash.

It's now even harder to figure out where and when to get into the game now that everything has performed so well. And managers who aren't in big plays look like they've already missed out.

For example, mutual fund managers who didn't get in on Apple ( AAPL) in 2005 and who stayed out because they were waiting for a pullback are starting to feel the heat.

They start to worry because they want to preserve their raises, bonuses and even their jobs, so they feel compelled to chase the market.

But as individual investors, we need to resist that temptation, said Task, because there will be a pullback, and that's when to get in.

For example, cyclicals including DuPont ( DD) issued a warning, and there has been negative news from Alcoa ( AA) and Phelps Dodge ( PD).

Combined with lower prices from automakers and a slowing housing market, these signs show that some market segments will weaken, he added.

Waiting for Cyclicals

Brian Belski, senior equity investment strategist at Merrill Lynch, told Task that the influx of hedge funds and commodities funds has added to the performance anxiety for traditional portfolio managers.

It's better for the investor because it means more diversification and more choice, but it means more competition for the equity manager, Belski said.

Belski discussed a recent Merrill Lynch report that said cyclical sectors including materials companies should see a move higher over the long term, thanks to factors like falling fuel prices.

"Near-term price weakness is short-sighted," said Belski, who recommended a 12-to-18 month perspective.

He recommended being market-weight in industrial and materials, and overweight in financials, health care and tech.

Merrill has encouraged investors to gradually move into large-cap stocks because it believes the market in the early- to mid-stages of recovery, Belski told listeners. Even if the economy slows, growth in general will remain positive.

"Corporate America has been very risk-averse given higher interest rates and higher oil prices," he said. "If these two factors abate, then risk aversion will abate...and corporations will finally start investing the cash they have on their balance sheets."

Finally, Belski said that the financial sector, especially banks, looks strong and that Merrill Lynch has upgraded the sector.

Bullish on Brooks

A caller wanted to know if Brooks Automation ( BRKS) was still a good story. Task said that holiday retail sales or electronics were certainly good for their semiconductor unit, and that the software division also looked like it is improving.

"If you're a momentum guy, you'll want to ride this," said Task.

But he was hesitant to recommend Computer Sciences ( CSC) simply because there has been speculation that it's a takeover target.

He said that the company has good fundamentals on its own, and that he'd hold it if he already owned it. However, he did not recommend chasing it.

Task said that Canadian Superior Energy ( SNG) may be played out along with the Canadian oil sands picks, and that the market was drifting back to "best-of breed" names like Nabors Industries ( NBR) and Chesapeake Energy ( CHK).

A caller interested in Audible ( ADBL) wanted to know if this might be a time to use a deep-in-the-money call.

Task said that if you're going to play options, then in-the-money is the way to do it. Buying controlling options further out in the future means that time works in your favor, he added.

Feeding on NutriSystem

Finally, chairman and chief executive of NutriSystem ( NTRI) Michael Hagan told RealMoney listeners a bit about the company's turnaround story.

He credited the company's success to outsourcing difficult projects and using the Internet to sell directly to customers.

The company used traditional marketing channels to push people to go to the Web and sign up, he said, stripping out a lot of the costs.

"Consumers can eat our products for about $10 a day," he said, vs. $18 a day with other programs. Plus, they save on hundreds of dollars in membership fees.

While the fourthquarter is typically the slowest of the year for diet companies, Hagan said that the company's momentum will probably show continued strength even at the end of the calendar year. He said that the company had finally hit its stride on the marketing side, hence the strong performance.

Aaron L. Task is the co-executive editor of TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to atask@thestreet.com.

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