The hottest segments of the market over the last quarter have been commodity related names, specially coal stocks, steel stocks and agricultural names. Stocks like US Steel (X) had gone from under $100 just earlier this year to over $190 - until this week when all these hot stocks have turned over. Potash (POT), Mosaic (MOS), Walter Industries (WLT), Alpha Natural Resources (ANR), Cleveland Cliffs (CLF), CVRD (RIO) were all down 5%-15% just today, and as much as 25% over the last week.

There are two main things happening - one is sector rotation, but then where are people putting their money? Good question and I believe the answer is cash. There was no sector that was up today. Second is redemptions - funds that have owned these stocks above sold them heavily to take profits.

I don't think the pull back is over and while I am not shorting any of these names, I believe you can probably buy them lower.

At some point later this summer, maybe sooner than later, the market will sell off much more sharply and I expect panic sellers to come in and dump everything. That is the point where one needs to load up. Until then, sell into rallies and start collecting cash.

-- Faisal Laljee
Full Disclosure: I own POT, X and RIO but my position can change anytime without notice.

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