so goes January so goes the year

US stocks are positioned to continue a strong January, a month that tends to serve as a predictor of how the rest of the year will go.

On Friday, the major indexes marked its 3rd straight week of gainers, with the DJIA rising 96.50 pts, or 0.8%, to finish at 12,720.48, up 2.4% on the week.

This week come quarterly earnings reports from more than 100 large-cap stocks, including Apple Inc. (NASDAQ:AAPL), Yahoo Inc. (NASDAQ:YHOO) , McDonald’s Corp. (NYSE:MCD), Ford Motor Co. (NYSE:F) and Boeing Co. (NYSE:BA) and Netflix Inc. (NASDAQ:NFLX) .

There will be word from the US Federal Reserve about policymakers’ interest- rate expectations after a 2-day meeting; more housing data; and an estimate of US Q-4 economic growth.

January optimism, the Wall Street adage “so goes January, so goes the year,” comes from the January barometer devised by the Stock Trader’s Almanac, which found the S&P 500′s performance during the month to be a reasonably decent predictor for the year ahead. The US major market indexes are up between 4% and 7% for the month so far, with 7 trading days left to go.

We have seen 10 consecutive Quarters where companies beat earnings expectations, and that is not may not be a sustainable trend, so it would not be unusual to have a Quarter or 2 of single digit earnings growth.

Along the same lines, it should not come as a surprise if the market pulls back in coming weeks, because equities never move up or down in a straight line.

The S&P 500 Index (SPX) Friday added almost 1 pt, or less than 0.1%, to end at 1,315.38, up 2% on the week, while the NAS Composite (RIXF) declined nearly 2 pts, or not quite 0.1%, to close at 2,786.70, + 2.8% from the past Friday’s close.

There were important breakouts last week, with the S&P breaking out above 1,300 for the first time since July and the NAS getting over its October high mark indicating that the recent tech sector leadership says there is sustained optimism that the economy is going to do better in Y 2012. Also, rallies in financials, basic materials, and durable goods are also Bullish factors.

Wall Street closed Friday with Greece reportedly near agreement with private creditors on a debt-swap deal, and European Union (EU) finance ministers Monday meet to discuss on their most recent fiscal-pact draft.

This coming week we will learn that Europe is still on the map and that Europe’s ongoing efforts to get the upper hand on its debt crisis is working, at least in the near term.

So barring a surprise that jolts the market, Wall Street is less at risk of experiencing wild swings of Y 2011, regardless of how events play out in Europe.

And even if Greece drops out of the Euro, people will not be too surprised IMO.

Europe was a constant media theme in Y 2011, the Arab Spring, the Japanese tsunami and adverse weather conditions in the United States last Spring really jolted the Global and US economy during Y 2011. Not to mention the gridlock in Washington DC. Stay tuned…

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
www.livetradingnews.com

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