This is the time of year where everyone is looking to hear all the gurus tell us their top ten picks of 2012 as well as their targets for the market. Well…the average strategist believed the market would be up double digits in 2011. The fact of the matter is that no one knows which stocks will do best in 2012 or where the market will be at the end of year. It is all guesswork. I don’t even know what I am eating tomorrow. My approach is simple. Let the market be your guide. I just want to stay in lockstep or one step ahead. You cannot hide bull markets and you cannot hide bear markets. They all come with the same characteristics they have had in the past. Staying one step ahead or in lockstep had me telling you in February that financials were topping. It had me telling you in the May to July period that the market was topping. It had me telling you in late April that silver was completing a climactic move and to look out below. It had me telling you that when we started to see daily gaps of 3-4% and 10% moves in 3-4 days only to turn right back around that I had no edge and the market was impossible to play. It had me telling you when gold breaks the 150 day moving average for the first time since January of 09, to expect vicious selling.
Just because it is a new year, it does not mean anything has to change. The fact is the market remains a pain in the rear. There are crosscurrents all over the place but when you take a step back, here are the specifics as we enter the new year:
Defensive issues are leading. Food, drugs , beverages, tobacco, utilities, household products, discount retail, oil pipelines and muni bond funds are showing the best relative strength. This is normally not good news when the big money is going defensive.
But the other part of that equation is that the worst areas continue to hold their lows and at least have something they can possibly build from. This includes commodities, financials and some foreign markets. In particular, I am watching the German Dax which could be tracing out a decent low. If these areas can break above near term resistance, the market can get another leg up.
Just keep in mind that January is often spastic as the big money gets positioned. We may have to again deal with more nauseating gaps.
SPECIAL NOTE: Be sure to register now for my next live Webinar on Saturday January 21, 2012. I will talk about the important implications of early-January’s market action…and much more. Click here for more information.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.