Hi everyone,

I hope you all had a great Christmas and were not too put out by the snow or burst pipes! Just a short post today to wish you all a very Happy New Year and the best of luck with your trading in 2011 and to provide a few thoughts on the year just past and what to look out for in January.

2010 - A Choppy Year

As the year draws to a close looking back over 2010 it’s been a pretty good year for the markets for the most part. This time last year I wrote a post commenting on how the DOW was struggling to break through resistance at 10,500, well it eventually did in late March, rising all the way to 11,250 before selling off sharply again during the Summer months to around the 9,600 mark. We then had some volatile trading up to the end of August as the Bulls and the Bears fought out the war between those who believed “we were on the road to recovery” and those who said we were heading for a “double dip recession“. In the end the bulls won out and from September to year end we have seen the DOW rise over 12% from 10,300 to close our the year around 11,500. So we have finished up the year with a nice 10% rise for the year on the DOW. Fans of the Nasdaq will be even happier with the tech index rising a very impressive 19% since the start of 2010.

Will “The January Effect” Return in 2011?

Finally before I wrap up this post as we get ready for a new year which will no doubt bring plenty of great trading opportunities keep an eye out for the so called “January Effect” during the next few weeks. The “January Effect” is based on the theory that stocks generally rise in during the first month of the year. Although we didn’t see any such move last year (when the DOW actually sold off about 3.7%) historically January has seen the DOW record an average increase of approx 1.6% between 1950 and 2010. Most market analysts believe these increases are driven by a combination of pension funds putting new cash investments received to work and individual investors who sold shares coming up to year end for tax reasons putting their money back to work in the first few weeks of the new year. Whether the market can continue to push higher this January after rising 12% over the last 4 months of 2010 will be interesting to watch but a push towards the psychological 12,000 mark seems to be in it’s sights.

Until next time enjoy the New Year celebrations,
Happy Trading,
SpreadTrader.ie : -)