Good morning! It's a very quiet day for results, but there are a few trading statements that I'll take a look at.

Markets overall had a much-needed correction yesterday - the tone in small caps has become far too bullish, even slightly frenzied in some areas, and it's becoming very hard to find value now. Just look at the extraordinary bull run in the FTSE Small Cap Index XIT (FTSE:SMXX) below. Some of that rise is due to increased earnings, and also the marking up of prices to factor in economic recovery, but surely a more meaningful correction is only a matter of time? Hence why I'm selling things that look fully valued (I sold Pilat Media Global (LON:PGB) yesterday at 62p for example on a big spike up following positive contract announcements, and a magazine tip).

The opportunities now are probably going to come from sitting in cash, and picking up bargains when the next big market sell-off occurs. This sometimes hits small caps hard, providing good opportunities, e.g. yesterday Volex (LON:VLX) suddenly spiked down 10% on thin volume, and no news, as a clumsy seller hit the Bid hard - which you see a lot of these days, as Spread Betting companies close out over-geared clients, and don't really care what price they get.

Such spikes are one person's pain, but our opportunity. Hence why I think having some cash on the sidelines is vital right now, and it doesn't matter at all that you get no return on the cash in the meantime, as simply having it ready will provide a much bigger opportunity when the market suddenly throws a bargain in your direction. That's how I see it anyway.

Opportunities are also coming on an individual company level from profit warnings. I've not measured it, but the market seems to be forgiving good companies for profit warnings more quickly than in the past. Subjectively, it seemed to be at least six months for sentiment to recover on a company that disappointed, whereas now I've observed it can be as little as a fortnight, or more typically about two months. As long as it's a good company, that has just hit a temporary bump in…

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