Headed into a fresh start in 2012, the market still has plenty of unresolved divergences with respect to within equities and against other asset classes. The first chart below is a yearly look at the S&P 500. As you can see, we printed a long-legged doji in 2011, denoting violent indecision overall for the year. Moreover, you will also notice the major resistance and support areas over the past twelve years. Indeed, we remain in a secular bear market, since the dot-com bubble burst, moving largely sideways for over a decade now.
However, within a secular bear market we can most certainly see bull cycles. The pertinent issue is whether we are on the cusp of one right now. I am still inclined to wait for the market to show me it has the “good stuff,” in terms of seeing numerous stocks set up and then break out with strong volume/institutional support. As you can see on the second chart below, which is a monthly chart of the S&P 500, the 20 period monthly moving average (which I have written about several times, namely here) is still rising, albeit at a slower rate.
In sum, just because the clock has struck midnight on 2011 does mean that I am casting aside the game plan I had for most of last year, that being a defensive style of hit-and-run trading while protecting capital. I am eager to shift gears and become more aggressive, but the market is going to have to guide me there first, since me trying to create a market I want is almost always a recipe for making mistakes.