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Chaikin Market Commentary 1/13/2012

|Includes: SPDR S&P 500 Trust ETF (SPY)

Chaikin Market Commentary 1/13/2012

The S&P 500 is up 1% for the week at 1295.50, remaining comfortably above its 200 day average price of 1258, which is also where it closed 2011. From a technical point of view the market is overbought, having just rallied 12% from its low of 1159 on November 25.

What Does This Mean To Me?

What this means in practical terms is that the market will  likely hit resistance just above current levels in the 1305 -1310 area on the S&P 500 and be vulnerable to profit taking. Since the market was up the first week of January and appears to be on course to be up for the month of January, this bodes well for a positive outcome in 2012 based our analysis of the presidential election cycle which points to a positive move in the stock market when a sitting president is up for re-election.

If the market finishes January above 1258, based on past history, we would expect it to finish the year higher with gains in the 10% - 14% range. It is particularly encouraging that the financial sector is acting better for the first time in a long while. Look at Bank of America and JP Morgan Chase. Both of these stocks had their Chaikin Power Gauge Ratings turn positive in mid to late December and have rallied in almost a straight line since.

Of course, nothing is certain in the stock market and we are in volatile times, with economic cross-currents from the Euro Zone countries and China playing havoc with both investor’s emotions and the world economies.

Recommended Strategy

Buy dips down to 1260 – 1270 on the S&P 500 Index while avoiding the temptation to chase the current strength as the market tries to get above 1300. What would make us more aggressive would be a decisive move by the European Central Bank to help resolve their sovereign debt crisis or some blow out earnings reports here in the U.S.

Find the winners…Drop the losers

Continue to use the Chaikin Power Gauge rating to position your portfolio for profitability in 2012.

Eliminate stocks with a bearish Chaikin Power Gauge rating and replace them with stocks in strong industry groups which have bullish Power Gauge ratings.

Don’t chase stocks but rather use short-term market pullbacks to make your purchases.