The stock market’s powerful start to 2013 has important implications for stocks in the first quarter of 2013 says Moneyshow’s Tom Aspray and picking a good buy level is the key to success.
The stock market has started off the year in an impressive fashion as the S&P 500 had its best daily gain since late 2011. The final agreement was disappointing on many levels, but for investors who have been fixated on the fiscal cliff for the past few months, it has been a frustrating time.
Since early in November (Don't Jump Off the Fiscal Cliff) I have been trying to convince investors that selling in fear over the potential impact of any political or economic debate should not be part of any sound investment plan. Instead one should have a clear plan of what they are willing to risk before they buying. This often will force the investor to buy closer to support.
The difference between success and failure in the investment markets can often be traced to the entry level. Though the setback into the November lows was a bit sharper than expected, there were no signs that a major top had been confirmed.
The positive signals from the market internals in 2012 has favored buying stocks or ETFs that are outperforming the overall market if they drop back to support levels where the risk can be better controlled. In late November, I referred to this as smart buying as often times buying too high means that longs are stopped out just before prices turn around.
The current analysis of the NYSE Advance/Decline line still favors buying stocks at support as it has for the past few weeks. The recent correction allowed us to add new long positions at good levels, but unfortunately the thin year-end selling also stopped us out of some positions. Now is a good time to adjust stops in the Charts in Play portfolio and one sector has now joined the list of market leading sectors.
Chart Analysis: The daily chart of the Spyder Trust (SPY) shows the up gap opening Wednesday and the strong close above the December highs.
The Select Sector SPDR Materials (XLB) gapped through the long-term downtrend, line f, on Wednesday as it is already close to the 2012 high at $38.57.
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