“We spend a lot of time studying market history, trends, outlooks, politics (unfortunately), geopolitical tensions, economics, and we do a lot of research. Trading the market is never easy and trading options on the market or stocks make it twice as hard because you have to be right in a certain time frame. With options, a time period could be a day (on earnings news), a week or two (trends), or a few months (takeover targets). Of course, we won’t always be right but most of the time we are pretty close on predicting where the market or stock will be within a given time frame.
The purpose of trying to figure out what the market or stock will do is to make money and often times you need a game plan. In mid-December, we predicted a 4% rise for the market and gave you some price targets. By Christmas, we were getting emails why we continued to feel the market would rise and into January many wrote us fearing a market pullback. We have and will continue to give you the clues to look for but it is important you read us carefully and follow the charts every day and every week to become a better trader.
On February 4, 2012, we “predicted” targets of: Dow 14,000; S&P 1,550-1,600; Nasdaq 3,750; Russell (2000) 1000. At the time, the Dow was at 12,862; the S&P 500 was at 1,345; the Nasdaq was at 2,905; and the Russell 2000 closed at 831. As you can see, we were only a month off from nailing these targets but some were a little high.
A few more of these targets probably would have been achieved but the selloff from the October 2012 highs to the December lows caused some serious technical damage from the Fiscal Cliff worries. We didn’t factor the zombie pullback and meddling in the market last year but we will this year.
We like to make our predictions for the market and where it will be for the year after January ends so let’s take a look at what could happen. First, the bullish outlook:
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First, let’s factor in a 2% move higher from here until Valentine’s Day or the week after. We have been mentioning we haven’t seen a 2%-3% surge like we saw at the beginning of the year and in a perfect world we get that by mid-February. If not, and the market rises 1% this week and next, good enough.
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These will be our yearend targets but they may take until the end of January 2014 to hit (wink) like they did this year. The one caveat we would like to make is if the indexes break below their 200-day MA’s at any point this year, all bets are off.
Economic news will be lighter this week but earnings are still in play with some B+ names reporting. Next week is options expiration week and there will be an opportunity to trade some low risk/ high reward “cheap” options. We are still winding down our current batch of trades for the Daily but we may do some quick in-and-out plays and for the Weekly, there are one or two trades we may recommend this week.
February is usually the weakest link in the cyclical bull market runs from December through April but this time could be different if the momentum sticks. We also have to expect the unexpected and we often talk about stair-stepping and elevator dropping which is what the market feels like it is doing right now. Our portfolio is light so we should be in good shape as the bulls look to push new all-time highs for the S&P and Dow over the near-term.” (from 2/3/2013 Weekly Wrap Update)…
The bears started the week off with a test to support which served as prior resistance as the indexes fell 1%. Much of the worries came from overseas on corrupt politics but Tuesday’s rebound soothed fears of an impending selloff.
Wednesday was a flat day for the market but the Wall Street pros and talking heads were still calling for a pullback and telling investors to buy “put protection”…for 6 weeks now. They reiterated their stance on Thursday as the indexes pulled back again but we specifically said to watch for a second half rally which the bulls pulled off. The market was down well over 1% but didn’t say “uncle” as the indexes held near-term support (again) and recovered over half their losses.
This led to a nice follow-through finish on Friday as the bulls won their sixth-straight week (minus the Dow) and continued to push new highs to start the year. Our February forecast is bullish until next week but at some point, we do expect a much larger dip than 1%. We will worry about that when the time comes but for now, this rally is no bull.
If you are not a subscriber but would like to read more please click here. We are one of the fastest growing stock options trading advisors on the internet and we had an incredible 2012. We offer 2-3 powerful call or put option trades each week (depending on market conditions) aimed at triple-digit returns for our Daily newsletter and our Weekly Wrap Covered Call Portfolio strides for double-digit returns on a monthly basis. Together, we were 159-70 (70% win rate) for both newsletters in 2012 awith over 30-triple-digit winners. Our 5-year track record from 2008-2012 is now a staggering 621-273 that is also a 70% win rate. We doubt you will find a better options trading service. We are 14-3 for 2013.