Time To Jump In?

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The market started 2013 with a gap higher and then never looked back. I’m sure this will be on the mind of many traders this January.

Traders and investors easily forget their losses, but they often remember the big trades that got away. I’m sure for many traders 2013 “got away”. And there is nothing like the New Year to remind a trader of the past, and recharge his passion to be proactive in the coming year. Will this lead to rush to get into stocks in January?

For the last couple weeks the stock market has looked like a marathon racer breaking records sprinting to the finish line. The market’s confidence was displayed in full force as even the Fed’s announcement that it would start draining the punch bowl of liquidity was interpreted as good reason to buy stocks.

And why not be bullish? The latest GDP numbers came in at 4.1% which is the best in about 2 years and at the upper end of the range of the last 10 years. Plus, unemployment rate is near a 5 year low. It’s no wonder the market continues to act as if all is well and improving.

Big caps are leading, there's a "next big thing" mood fueling moves of irrational exuberance in the social media sector, companies are buying back their own stock at a record pace, and even the retail investors are back in the game as demonstrated by weekly stats showing they’re plunking more cash into stock funds than they have since before the financial meltdown 6 years ago.

Even the market’s own statistics are bullish for 2014… according to Barron’s this week, “Since 1927… the S&P 500 has finished in positive territory in nearly two-thirds of the years that followed a gain of 25% or more.”

So why shouldn’t we simply expect traders and investors to rush into stocks in January like door busting shoppers on Black Friday?

There are many real reasons why January is often a trend defining month for the markets. As good or bad as the prior year may have been, January starts a clean slate for the market driving fund managers who will be judge by how they perform for the next calendar year.

So there is no better time than January for the big traders and investors to reconsider, renew, and or adjust their bullish or bearish convictions. This can create and reverse big trends quickly.

The savvy trader understands that January is not just another month. It’s time to carefully evaluate the condition of the market going into January, and then watch closely for the signs of a strong directional bias!

This week’s Market Outlook video looks at patterns and indicators you should pay attention to over the next couple weeks to make sure you’re on the right side of the market in January.