Yearly charts usually get far less attention than their shorter brethren, but they still have useful lessons to give smart investors. MoneyShow's Tom Aspray analyzes the yearly trends for these four major asset classes to point out what levels you should be watching as we move into 2013.
Some investors, as well as quite a few traders, might be surprised to learn that many successful long-term traders pay considerable attention to the yearly price ranges of the key markets.
This is particularly true of a trader’s favorite markets, as many have these data points memorized. With just over one month left in 2012, we are able to see which markets have significantly changed since 2011.
As a year progresses, the opening range gains additional importance. This price gives one a broad view of where demand exists, as if prices are below the year’s opening, most who bought during the year are now holding a losing position. This creates a level of resistance or supply above the market.
A higher year-to-year close is also a big-picture positive, just like a lower yearly close can be a measure of downward momentum for the coming year. I think a closer look at the yearly charts will demonstrate why they are important, and can also help you identify the key levels for stocks, gold, the dollar index, and crude oil as we head into the new year.
Chart Analysis: The yearly chart of the S&P 500 covers both recent bear markets, 2000 and 2008. In 2000, the S&P closed the year lower at 1,320.28, but well above the year’s low of 1254.57.
The yearly chart of the continuous gold chart shows the spectacular rally since 2002, as that year’s close at $348 was above the prior four-year highs. This was clearly a major breakout, and since then gold has closed higher every year.
NEXT: Yearly Trends in the Dollar and Oil
The fate of the dollar has been part of the monetary debate for the past four years. The yearly chart of the Dollar Index shows that its range has been narrowing over the past eight years.
The yearly chart of the continuous crude-oil contract is dominated by the wide range in 2008, as the high was $147.27 and the low was $35.13. For the past three years, crude oil has managed to close higher,, but a lower yearly close is likely in 2012.
What it Means: The violation of a yearly support or resistance level does not often receive wide attention when it occurs, but it can be quite significant, as it often signals a shift in balance between selling and buying pressure.
The January 2008 violation of the prior year's low in the S&P 500 was followed by a three-month bear market rally, but in the next year it lost over 50%.
How to Profit: For the key markets that you follow, I would suggest you make a list of the year's ranges at the end of each year so you can refer to them as the next year progresses.