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Friday, February 1, 2013

Expect the Market’s Old Highs to be Smashed This Year

 The most powerful January in years should be able to support all but the most vicious sell-offs

Those who have followed the simple strategy of the S&P 500’s 17-month moving average have done quite well over the last 12 years. Now the S&P 500 is charging toward the big prize, which is the Oct. 31, 2007 high at 1,576. But before it can attain that goal, the S&P 500 must close above the high at 1,552 made on March 31, 2000. The chances are strong that it will surpass both goals before the end of the year.
The saying, “As goes January so goes the year,” is often referred to as the “January Effect.” This Wall Street adage has been accurate more often than not. Since 1900, when January has been positive stocks have been up 67% of the time, according to S&P. This January turned in the strongest performance in 16 years, so I would expect the old highs to be smashed.
The Nasdaq has plodded along since the November bottom. And now, just as it is within reach of two important highs, the Oct. 5 high of 3,171 and the Sept. 21 high at 3,197, it appears to be struggling.
Wednesday’s decline of 11 points triggered a sell signal from the MACD, and that could slow the advance.  However, a host of support lines and zones have been established since last summer, and they should hold any retreat from the current levels. 
Support exists at the March high of 3,134, the 20-day moving average at 3,125, the major support line at 3,100, the December high of 3,061, and finally, the 50-day moving average at 3,042, which happens to join with the intermediate trendline. 
Conclusion: The most powerful January in years should be able to support all but the most vicious sell-offs. Thus, all pullbacks should be viewed by investors as buying opportunities. Long-term investors should add to high-quality positions, and traders should focus on those sectors that have the best success records. Be long in 2013 or be wrong. ...

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