Monday, January 2, 2012

Stock Market Outlook for 2012 - Get the Year Off to a Great Start

Welcome to 2012!  Hope everyone had a safe and enjoyable New Year's Day and are ready to go for the new trading year as well.   Hopefully this post will help you get ready for the opportunities that lie ahead as trading starts Tuesday.   

We are starting this new year in a very interesting position.   The prior year was a very flat one but one that had lots of volatility.   High volatility usually means many emotions are involved and I am sure traders are worn out from all of the fakeouts and whipsaws we saw last year.   I have my doubts that either the bulls or bears are very strong in their convictions right now, so once we see the first move of 2012, I am hopeful it will last a little longer than a few days.   I don't know if dip buyers are going to come in on heavy selling and I don't know if shorts will be shorting every bounce higher - I think a move will take place one way or the other and it will be an intermediate-term one of several weeks to several months.   Maybe I am just subconsciously hoping this (because it would make trading so much easier after a very difficult 2011) but I do think the evidence points to this. 

You can see by the chart below that we are setting up in a nice coiling pattern, and this type of pattern typically does lead to big moves.   I have absolutely no clue as to which direction this move will go.  Honestly, I don't even have a gut feeling.   I am about as neutral as you can be right now.   My signals are pretty much neutral as well.   We are neither overbought nor oversold going into Tuesday.   It is a really unique situation and all I can say is keep your mind open and watch the levels on the indices that would indicate a breakout or breakdown to start the year.   That's all you can really do here - wait for the market to tell us what we should be doing.   I'll follow my signals and hope that they will not be false as many times as they were in 2011.  

S&P and Nasdaq

After going through my stock scans this weekend, I didn't really see an edge for the bears or bulls here either.   I saw some decent long setups, but also had a list of decent short setups.  Again, all you can do is be prepared on both sides and then take action when the signals occur.   Here are some of the best long setups I saw this weekend as the new year starts.   I have left out some names (RENN, PCS, OPK, AL, CBOU, ADES, ABD) that are thinner and lower-priced - they will be on my watchlist but I am not posting charts of them here.

ABVT
CIE
CMC
CQP
CSOD
OCN
RBA
SCSS
SLAB
SOA

Here are some of the best short setups for the upcoming week.  Some of these may turn out to be big winners on the short side for 2012 as they look they are topping and have much more room to fall.  This of course depends upon cooperation from the overall market and as I said earlier, we just have to wait and see what transpires over these first few weeks before having a better, clearer outlook. 

ARUN
BIDU
CRM
GMCR
HANS
HLF
LRCX

Good luck this week - be ready for anything.   Take care.

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