“On the surface, the stock market looks becalmed. Underneath, the action is furious — and some investors think that is providing signs of the market’s direction later this year,” writes E.S. Browning in today’s Wall Street Journal.

“Since pushing through 10600 in January, the Dow Jones Industrial Average has essentially moved sideways. It was virtually unchanged again last week, rising 11.63 points, or 0.11%, to 10595.55, including a gain of 7.55 points, or 0.07%, on Friday.”

“Beneath that sea of tranquility, some stock groups that had been weak, such as consumer-product stocks, suddenly have gotten stronger, while some of the strong groups, such as technology, have become weaker. Basic materials and industrials, which were strong, have weakened, while health care, telecommunications, and oil and gas, which were soft, are more powerful now. Some money managers are betting — with their clients’ money — that this reordering, or ‘rotation’ as some call it, will be an important trend in the stock market this year.”

” ‘As the new year turned, some people decided they should shift toward more quality and stability,’ says Keith Karlawish, president of BB&T Asset Management, the investment-advisory subsidiary of BB&T Corp., a financial-services company in Winston-Salem, N.C.”

“He and others say this is a trend, not just a fluke.”

” ‘We are seeing the pendulum swing back. I think it does have staying power,’ says Jeffrey Kleintop, chief investment strategist at PNC Advisors, the investment advisory unit of Pittsburgh’s PNC Bank.”

“The trend can be seen in the contrasting performances this year of the broad Standard & Poor’s 500-stock index and the technology-heavy Nasdaq Composite Index. As of Jan. 26, the Nasdaq was up 7.5% and the S&P 500 had risen only 3.9%. The S&P was being held back by its many consumer-product stocks, as well as its financial stocks and drug stocks, which weren’t keeping up with the soaring technology sector.”

http://online.wsj.com/article/0,,SB107849680476547625,00.html