Stock Market Road Map Signals Strength into Spring
On Tuesday investors were trying to figure out if 2012 would finally be a big year for the bulls.
If the first day of trading in the new year was any indication, it looks promising.
Both the Dow and the S&P rallied sharply largely after the latest ISM manufacturing index showed the closely watched index rose to 53.9 from 52.7 in November and 50.8 in October.
The increase suggests manufacturing activity and construction spending have picked up. In turn, investors interpreted the results as another sign that the economy was gaining steam.
As long as economic data trends higher, Andrew Burkly, director of equity strategy research at Brown Brothers Harriman says the S&P should follow along and also trend higher.
“Economic momentum is improving and that should carry the market higher,” he says. Unless prices at the pump spike, Burkly says the S&P marches higher.
OptionMonster Jon Najarian agrees. He thinks the latest ISM data shows a slowdown in Europe won’t have a pronounced impact on Corporate America. “It tells investors that we don’t have that contagion.”
Both pros are looking for strength, but Burkly tells us, the strength will only last until late spring. After that, Burkly anticipate weakness.
“If you look at the past two years, 2010 and 2011, the road map for the stock market has been strong in the first half of the year and then economic momentum starts to fade,” which in turn generates a drag on the market.
Burkley thinks that pattern will remain in tact and should serve as a roadmap as you invest this year.
Top trader Mark Fisher agrees. “Sell in May and go away,” he says.
Trader Joe Terranova sees the market a little differently. Rather than economic data, he says the market will be “all about earnings.” And he expects to see relative strength in corporate results. As a result he's also looking for strength in the second half.
What do you think? We want to know!
* Lots of strategists are making forecasts but the Fast Money pros were eager to her from Andrew Burkly, director of equity strategy research at Brown Brothers Harriman because he nailed the market last year.
For 2011 he said, the S&P would make high around 1350 in first half of 2011, and that a sell in May strategy would work. He also said look for low in fall, and rally to 1250 by year-end.
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Trader disclosure: On January 3, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova is long (VRTS); Terranova is long (IBM); Terranova is long (LQD); Terranova is long (MUB); Terranova is long (EMC); Terranova is long (CSCO); Terranova is long (AXP); Terranova is long (SBUX); Terranova is long (CSX); Terranova is long (APC); Terranova is long (XOM); Terranova is long (TRLG); Terranova is long (TRLG); Terranova is long (SWN); Terranova is long (V); Terranova is long (SU); Najarian is long (CIGX); Najarian is long (CME); Najarian is long (CBOE); Najarian is long (ANR) call spreads; Najarian is long (AAPL) call spreads; Najarian is long (CNX) call spreads; Najarian is long (CSCO) call spreads; Najarian is long (ACI) call spreads; Najarian is long (GS) call spreads; Najarian is long (RES) call spreads; Najarian is long (DVN) call spreads; Najarian is long (RIMM) call spreads; Najarian is long (MDR) call spreads; Najarian is long (LULU) call spreads
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