The MoneyLetter, MPL Communications Inc.133 Richmond St.W., Toronto, ON, M5H 3M8. 1-800-804-8846

According to Keith Richards (Portfolio Manager at Value Trend), the major U.S. markets have entered into a new mega-year bull market, having recently broken through a 14-year technical ceiling that began in 1999.

Some may argue that stocks should be getting ready for a bear market correction instead. This might make sense, given how far the market has moved lately.

True enough, market valuations are relatively high. Moreover, investors currently hold a rather irrational level of enthusiasm for stocks (often signs of a market top), as evidenced by various investor sentiment surveys.

So let us address the potential for a pending market correction in the near-term. Yes, we are due for a normal (i.e., not of the 2001 or 2008 magnitude) bear market correction sooner or later.

During the past 15 years, a bull - bear market cycle of bottom-peak-bottom on the S&P 500 has emerged, with each cycle lasting about five to six years.

Past troughs include the 1998 Asian Contagion trough, the 2002/2003 tech bubble double-bottom and the 2009 Great Recession trough.

If you have ever heard Keith Richards speak at a conference, you will know that he does not get too tied up in picking the exact dates where a cycle is due to bottom.

Instead, he notes a rhythm to the markets - and the current rhythm appears to be a tendency for troughs to occur about every five to six years.

If we measure from the last trough in 2009, a five- to six-year period would suggest the next bear market bottom will be in 2014 or 2015. This suggests a market peak either very soon (the coming months) or later in 2014.

As we continue to enjoy the remaining upside of this leg of the bull market, Richards is focusing on three main investment themes.

Growth stocks

Theme number one is to buy dividend growth stocks with great charts for a high percentage of your stocks. Stocks that fit this criteria include some (not all) of the pipelines, and the Infrastructure stocks.

We recommend Keyera Pipelines (TSX-KEY, $61.00), Pembina Pipelines (TSX-PPL, $34.23) and Brookfield Infrastructure (TSX-BIP.UN, $43.16) in this space. We also like Inter Pipeline (TSX-IPL, $26.08).

Leadership stocks

Theme number two is to look for rotation into new leadership. Texas Instruments (NYSE-TXN, $42.47) and American International Group (NYSE-AIG, $48.60) fit this bill.

They've both broken out of multi-year consolidation patterns that suggest a movement of money into these companies.

We also like the Canadian small cap universe. You can buy individual names within the group, or buy the index as a whole via the iShares S&P/TSX Small Cap Index (TSX-XCS, $14.78).

This sector was the dog's breakfast since early 2011, but it broke its downtrend around August of this year. Tearing the index apart, we have identified many constructive stock charts showing early leadership with superb valuations.

Given the volatility of individual names, we might recommend retail investors with less capital just stick with the index and trade through the iShares ETF mentioned above.

Stocks to avoid

Richards' third theme is to avoid buying or holding stocks that are clearly "rolling over" as they make way for the new market leaders.

While not necessarily a bearish call on these stocks, any stocks that are breaking their long-termed trend lines are likely going to take a back-seat in performance as we move forward in this late-party market.

Here are a few that have broken longer-termed trend lines, and may be worth selling or avoiding in favor of stocks with better technical profiles.

These include most of the big REIT's and telecom giant BCE Inc. (TSX-BCE, $46.72). And pipeline giant TransCanada Pipelines (TSX-TCA, $50.17) along with Enbridge Inc. (TSX-ENB, $44.48) are two of the pipelines that Richards advises to avoid.

On the U.S. side, American stalwart IBM Corp. (NYSE-IBM, $185.20) is a good example of a former market leader that has decidedly broken its uptrend.

Coca-Cola (NYSE-KO, $40.07) is also starting to show a potential break in trend, as has Tesla Motors Inc. (NYSE-TSLA, $126.36).

One last dance

Richards believes that the longer termed picture is bullish for the U.S. markets, but perhaps less so for Canada given the commodity exposure. The recent lost decade, which he accurately predicted way back in 2001 (visit www.valuetrend.ca to see his article on that topic) is over.

He also believes we are now in a new, big-picture bull market.

Keep in mind, however, that we are due for a mid-termed bear market correction beginning sometime in the next year or so. But before that occurs, Richards believes there is time for one last dance at this party.