Technical Analysis:  Is This Rally Legit?

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The strength this week has confirmed my suspicions that the markets are about to kick off an early 2012 rally.

Let me show you what I mean…


As you can see, the Dow is breaking firmly above the top blue trendline in recent trading.  And more importantly, both the Nasdaq and the S&P 500 are showing similar strength on identical technical patterns.  That’s a great sign for stocks as we kick off 2012.

But many investors still have lingering doubts…

Is the recent rally for real- or is it a head fake?

Are the markets really about to embark on a major rally?  Or is this year’s positive start just a move by Wall Street pros to sucker in unwary investors before the market moves lower?

After being burned by last summer’s European debt uncertainty, plenty of investors are likely asking those questions.  And most investors just aren’t willing to buy into this year’s rally… yet.

If you’re in that camp, listen up…

There’s a misconception that the debt problems in Europe have to be completely fixed before markets can move higher.  That line of thinking makes logical sense, but guess what… the markets don’t trade on logic.

They never have and they never will.

Fact is, the problems in Europe don’t have to be completely fixed for stocks in the US to move higher.  All that needs to happen is for Europe’s debt matters to not get dramatically worse.

And I don’t think they will… at least not for a while.

What I do think is about to happen is a very similar situation to early 2009.

At the time, US markets were plunging and investors were scared out of their wits.  The US housing market was in shambles and our banking sector was down for the count.  Yet in February 2009, stocks kicked off an incredible rally the likes of which many investors have never seen.

It didn’t make logical sense at the time, but that’s exactly what happened.

And remember, nothing was fixed in early 2009!  And even more importantly, these problems still aren’t fixed!  The US housing market still stinks and many of the big banks still have problems.

But guess what…

The Dow is up 90% since early 2009.  The markets are still here… and life goes on.

In my opinion, the markets are about to make a big move higher.  And if you don’t add stocks to your portfolio now, you’ll probably end up buying at much higher levels.  You may be more confident investing at that point… but you’ll have missed some big gains.

Until next time,

Justin Bennett

***Editor's Note***  Still wondering where to invest in 2012 for the greatest gains?  Check this out...

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