Thoughts At The Open

One of the best things about the stock market is that, at any time, investors have the opportunity to start fresh. The beginning of a new year provides a logical point where we an think about how we want to approach the market. One of the worst years in stock market history is behind us, and now is a good a time as ever to focus on having the proper mindset to stay flexible and react to the action as it develops.

There's no shortage of folks out there who are more than willing to let us know exactly how the action will play out over the course of the next twelve months, exactly when the economy is going to recover, and what stocks we need to be buying so that we too can be fully invested for the next great bull market that is surely getting ready to begin. Although it’s impossible to avoid having feelings about how things are going to play out, locking yourself into any rigid view robs you of your unique and powerful strengths as an individual investor. It doesn’t matter is you think that we’ve already begun the next primary uptrend, if you think the bear is going to start growling again, or if you think that we’re going to see the action punctuated by strong rallies and gut-wrenching disappointments. The thing that matters is that you are open-minded and are psychologically prepared to adjust your approach as conditions change.

So, with that in mind, let’s talk a bit about where we stand right now. Although the market was unable to make much progress after the strong start to December, we finally had some good holiday-style trading to end out the year. Volume was light and there’s no doubt that a lot of that was influenced by a heavy dose of window dressing, but it did allow the major indices to move back above their respective 50 day moving averages. Moreover, the fact that the broader market has been able to hold in a decent trading range near recent highs has also provided a foundation from which several individual charts have been able to develop decent technical set-ups.

In the near-term, with the indices again bumping up against short-term lateral resistance, it’s a stretch to think that we are simply going to rocket higher from here. However, new money flows into the market at the beginning of the year, so we still have some positive seasonal factors at work, and the market is at least in a position where we could see some further progress to the upside.

At the same time, we are still suffering from a lack of confidence, an absence of leadership, and the ever present specter of volatility. Forgetting for a moment the unpredictable nature of newsflow, those are the factors we need to be watching very closely. We need to look for groups that are seeing good technical progress as a whole, for investors to stop flipping as soon as they see the slightest of gains and for these wild swings to calm down – especially in the final hour.