All glory comes from daring to begin. --Eugene F. Ware
The market is set to begin 2012 on a very upbeat note. There was some positive Chinese manufacturing data that helped to lift commodities on hopes of increased demand, but mostly it is just some good, old-fashioned new year cheer driving the early action.
Historically the first few days of the new year tend to have a positive bias. Psychologically, folks are anxious to start off on a positive note and are inclined to be optimistic about what lies ahead. In fact, according to Sentimentrader.com the second trading of the new year has consistently been the most positive day of the entire year, although that hasn't been the case recently.
Not only are we dealing with positive emotions to start the year, but we also have some unwinding of the administrative moves that were made at the conclusion of 2011. Many market players locked in gains and losses and now are looking to put that idle cash back to work quickly. No one likes to lag the indices out of the starting gate, so there is some increased pressure to quickly put cash back to work and to chase strength at this point.
Regardless of what the market is doing this morning, the great thing about kicking off the new year is that we have a clean slate which allows us to clear our minds and start fresh. Last year is history and we need not dwell on it as we focus on ways to profit in 2012.
I have no idea what the year ahead will hold and, frankly, I'm tired of all the predictions, especially since no one ever is right other than by luck. I've never made a dime from annual predictions and I suspect that they have lost people far more money than they have made them.
What I do know is that we will have great trading success if we stay mentally prepared to deal with a market that is sure to have plenty of twists and turns. Europe is not likely to go away, the US is going to continue to have plenty of economic challenges and the election should add some drama. At the end of the year we could just as easily be up 20% as down 20%, but that will be irrelevant. Success will be a function of our ability to adapt as conditions change along the way. We will have big rallies, some nasty downside and plenty of opportunities to profit.
Right now we have some optimism to drive the action. We might as well try to enjoy it because it will wear off fairly fast and things will become much more challenging very soon.
As we kick off 2012, keep in mind that success is a product of grinding it out day after day. So strap on your trading helmet, adjust your goggles and buckle your seat belt. It is going to be a bumpy ride.