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Goodbye 2011 . . . . Not Much Accomplished December 31, 2011

Posted by Tom in Thoughts.
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My data sources show the S&P 500 closed at 1257.64 on Dec. 31, 2010 and closed at 1257.60 on Dec. 30, 2011 . . . so technically we lost .04 of a point in 2011.  If you were invested in the largest 500 stocks in the US, you basically broke even for the year.  Not very impressive.  But boy . . there was tremendous volatility in between.  Indexes worldwide changing 3% or more in a single day, both Up and Down.  Not for the faint of heart.

I am doing a year-end wrap up for my monthly client newsletter (in a different tab above).  It will be about a week tardy since I’m gathering up a few extra items of data for documentation, so watch for it after next Saturday (1-7-12).

This week was “weak”.  That is the typical holiday volume (or lack of it) made for prices that were rather (in my opinion) unconfirmed.  In many cases a few thousand shares can move prices in a shallow market by many more points than would normally be the case.  So we will see what happens next week.  Tuesday the UK reports manufacturing strength and on Thursday Germany will report their domestic retail sales.  These are important because they will confirm or deny the concerns about the strength of the European economy.  If the EU slips into a recession that will only make for a slower US recovery, which is relatively modest right now anyway.

Here what I see in the charts right now:

 

The chart above shows a rather nice recovery from the late October lows and there is some positive economic news to support that.  Much of the sudden downward moves this year were caused by International issues (Japan tsunami, Europe’s debt, “the China Slowdown”) so maybe things are getting back to a more stable “normal”.  The blue triangle lines drawn are a classic formation known as a “coiled spring”.  The idea is that prices continue to tighten into a “spring” of lower Highs and higher Lows, to suddenly breakout either Up or Down.  IF that’s the case, we shouldn’t have to wait long to see the direction.  (Then again, they could just continue to oscillate in a trading range.)

In the short-term Defensive stocks (Consumer Durables, Utilities, Healthcare and Dividend stocks) are doing well.  Going out further in time we would add (select) Manufacturing, Energy, Transportation and (select) Construction sectors.  Once the final Christmas sales figures come in, and how much consumer debt there is, we’ll see just how confident the US consumer actual is.  Perhaps an indication of what 2012 will bring.

Wishing All a very Happy New Year !

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