Last week, Microsoft?s forward guidance disappointed investors? expectations. In addition, several earnings reports issued by tech firms were less than impressive, and Google-mania wasn?t enough to prevent a sharp correction in the previously perky technology sector. At the same time, oil prices edged higher on supply concerns, causing more pain for the market as a whole.

Bullish sentiment has taken a bashing but isn?t dead yet, among either individual investors or fund managers.

They are sure to have another go at pushing the indices higher even though the challenges have increased.

An easing of oil prices may simply provide a needed rationale.

It is a tough market to be in. Many hedge funds have had a miserable time, thus far this year.

But the regular equity-fund managers have had it rough too, with a goodly number failing to beat their benchmarks.

Some very big names have bit the dust, in what may turn out to be an annus horribilis for them.

In 2003, with the market trending up and high-beta stocks flying, the game was comparatively easy to play.

You just needed to identify a trend and latch on to it. Timing skills weren?t particularly important. As long as the trend lasted, you could profit by being long.

CTAs (Commodity Trading Advisers), too, had a field day.

Most of them are trend followers par excellence, and played the commodity boom very profitably via futures contracts.

As the saying goes among their coterie, ?the trend is your friend until it ends?. Unfortunately for them, the trend ended a while back and they have been pretty much friendless ever since.

Alas, cycles change.

And, it takes skill to recognise what kind of environment you?re in.

Many CTAs and foreign exchange players got burned trying to play yesterday?s game.

Every time they thought they had identified a trend, it petered out and reversed course. But, hey, not everybody is complaining.

Those who took to the other side of the trade, profited at the expense of the losing CTA and FX players. Three cheers for market efficiency.

This year, it has been difficult for most investment professionals to identify optimal style and direction.

In a more challenging economic environment, mega-caps are supposed to be a safe play because of their financial strength, ostensible pricing power ?etc. Except that these heavies have thus far underperformed the smaller guys.

If investors thought that defensive sectors were safe vessels to board ahead of bad weather they were badly mistaken, as most of these boats developed serious leaks.

So, holding their nose, they loaded up on cyclicals, ignoring economic indicators that signal a coming slowdown.

But, sooner or later, reality will catch up with them, necessitating a timely jump that may not be all that well-timed.

Spitzer?s campaign has devastated the ranks of insurance stocks, which may now be ripe for a bounce from oversold conditions.

As though the travail of the insurance sector wasn?t enough bad news, many banks have tabled iffy third-quarter earnings reports.

But that?s not all. If the bullish flattening of the yield curve continues, the banks could feel even more pain.

And remember that the financial services sector is the biggest component of a broad market index such as the S&P 500.

@EDITRULE:

Iraj Pouyandeh is a Strategist and Senior Portfolio Manager at LOM Asset Management and manages the LOM Equity Fund. Mr.Pouyandeh sits on the Investment Policy Committee responsible for determining global asset allocation. The fund has returned 15.07 % over the past year. For more information on LOM?s mutual funds please visit www.lomam.com.