The Week Ahead: Scaling the Wall of Worry
Smart investors who took Tom Aspray's advice are now well positioned as stocks have started off the year with a bang. Tom sees more opportunities in the coming weeks, but stresses that buying the strongest stocks or ETFs at good levels will be the best recipe for success in 2013.
Stocks finished 2012 and started off the year on a very strong note, with the Spyder Trust (SPY) gaining over 4% and the Powershares QQQ Trust (QQQ) doing even better. Though the monthly jobs report was a bit weaker than expected, stocks were able to hold their gains into the close on Friday
Pessimism over the economy and the stock market was rampant in the second half of December, as evidence mounted that individuals were avoiding stocks. The technical picture was much different, and the new high in the NYSE Advance/Decline line suggested that “stocks could be the best Christmas gift this year.”
Since the first wave of cliff-related selling reached its peak in mid-November, the technical evidence indicated that the market was just correcting and not forming a major top. The skepticism was easy to understand: the dysfunctional action in the House of Representatives was embarrassing, especially the decision not to vote on Hurricane Sandy relief.
This has been the pattern for the past few years.