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Key Bullet Points for the End of the Year


Keep these in the back of your mind.

The next two months of 2012 should be very interesting. Traders and investors are likely to have many questions due to the uncertainty that seems to be prevailing in this ebbing 2012. Regardless of your outlook, here are several general points that I would like to outline. I suggest that you keep these in the back of your mind.
  • The large-cap S&P 500 Index (INDEXSP:.INX) is up over 12%.
  • Sentiment remains negative.
  • Corporations are maintaining boatloads of cash on their balance sheets.
  • Several months ago, I noted how "big name" firms such as Fidelity were pouring billions of dollars into bonds instead of equities.
  • "Sell in May and go away" is over.
  • Historically, November-April is a very strong six months for the market.
  • The "blue chip" companies in the Dow Jones Industrial Average (INDEXDJX:.DJI) generally perform very well in November.
  • The bulk of the third quarter earnings season has come and gone.
  • Despite companies posting worse-than-expected earnings, we maintained and held the key 1400 level on the S&P (chart below).
  • Since 10/23, we have, in general, been chopping sideways between 1400-1425.
  • Another breakout (and hold) above 1420/1425 bodes well for the bulls (April, 2012 highs).
  • Fund managers (especially hedge funds) are underperforming the market YTD.
  • Courtesy of QE3, the Federal Reserve is pumping $85B per month into the open market for the rest of the year.
  • Housing is steadily improving across the country (per the Case-Schiller Index).
  • The last few jobs reports have beaten consensus estimates.

If you are familiar with our work here at Schaeffer's, then you know that we like to see negative sentiment in the face of positive price action. Our outlook remains bullish as we enter into the first full week of trading for November. Exercising patience in months such as October showed "cautious thinking" and for those who displayed such caution, they rightfully benefited from avoiding a volatile October. We look forward to wrapping up this bull market in 2012, and are ready for the next "leg-up" in these final two months. The eight weeks remaining in the year should prove to be exciting.

This article by Peter Bryans was originally published on Schaeffer's Investment Research.

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