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How to Beat the Market in 2012

By Jeff Clark
Tuesday, January 3, 2012

If you want to make money in 2012, you must learn to trade.
 
Last year was full of extremes. The stock market went from extreme overbought conditions in April to extreme oversold conditions in October. It ended the year extremely neutral.
 
The S&P 500 went nowhere in 2011. If you count the dividends, the "buy and hold" crowd managed to eke out a 1.5% return for the year. Yes, it's a gain. But it's hardly worth the risk of stock market exposure.
 
Traders, on the other hand, fared much better.
 
Even by just following the free advice we offered here in Growth Stock Wire, you would have been out of or even short the stock market in April. You would have bought stocks in early October. And you would have successfully traded in and out of the market several times during the last quarter of the year.
 
All in all, you could have made anywhere from 7% to 35% with just a few well-timed trades.
 
I expect we'll see much of the same sort of action in 2012.
 
Lots of analysts are bullish for 2012. But there are lots of bears, too. So it's really anybody's guess as to what this year will bring. While I don't expect the stock market will end the year much more than 5% or so above or below where it is right now, I do expect we'll see plenty of wild swings during the trip.
 
Those swings will continue to frustrate long-term investors. But they'll create profitable opportunities for traders.
 
At some point in the future, the market will jump back into "bull" mode. At some point, you'll want to buy stocks and hold on for the long term. Stocks will be in a long-term uptrend... and the "buy and hold" philosophy will be more profitable than trading.
 
Right now, though, traders have the upper hand. It has been that way since the stock market peaked in 2000. It was that way in 2011. And it'll be that way in 2012. In fact, I suspect we'll see another four or five years of a trader's market.
 
Investors should do OK this year. So if a 5%-6% return is enough for you, stick with the "buy and hold" philosophy. You'll do just fine.
 
But if you really want to profit this year, be willing to trade. It really doesn't take much effort. And as we saw last year, the rewards could be 20 times higher.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

While buy-and-hold investors may be frustrated by the market's sideways action, Doc Eifrig told readers about an unusual way to generate 80% returns per year while stocks go nowhere. It's simpler than you think. And Doc calls it "one of the market's best shots at safe, easy money."
 
For a trade to start the New Year, Frank Curzio offered Growth Stock Wire readers one area of the market with a fantastic risk/reward setup for 2012. His colleague Larsen Kusick offered a shopping list of companies to capitalize off this long-term uptrend.

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Silver finishes 2011 on a down note... price falls more than 20% in the past seven weeks.  
 
Biotech giant Amgen surges to its highest level in more than four years.
 
Big defense contractor Lockheed Martin is up 20% over the past year, despite worries about government spending.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1257.60 -0.4% 0.0%
Oil (USO) 38.11 -0.8% 0.0%
Gold (GLD) 151.99 +1.1% +10.9%
Silver (SLV) 26.94 -0.5% -9.5%
U.S. Dollar 80.23 -0.2% +0.6%
Euro 1.29 -0.2% -2.6%
Volatility (^VIX) 23.40 +3.3% +33.6%
Gold Stocks (^HUI) 498.73 +0.6% -12.2%
10-Year Yield 1.87 -90.1% -44.5%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 125.50 -0.5% +1.9%
Canada (EWC) 26.60 +1.6% -12.2%
S. Korea (EWY) 52.26 +0.1% -13.0%
Japan (EWJ) 9.11 +0.8% -14.4%
S. Africa (EZA) 61.07 +0.5% -15.2%
China (FXI) 34.87 +0.1% -16.7%
Lat.America (ILF) 42.57 +0.5% -17.9%
Singapore (EWS) 10.83 -0.9% -18.2%
Israel (ISL) 12.75 +0.7% -19.9%
Taiwan (EWT) 11.71 -0.9% -21.0%
Russia (TRF) 13.61 +1.1% -40.4%
India (IFN) 19.04 +0.9% -43.1%

Sector ETFs
Symbol Price
Change
52-Wk
Utilities (XLU) 35.98 -0.7% +19.7%
Big Pharma (PPH) 72.71 -0.2% +17.0%
Retail (PMR) 21.96 -0.9% +13.2%
Health Care (IYH) 71.57 -0.1% +11.0%
Consumer Svcs (IYC) 71.41 -0.5% +6.4%
Real Estate (IYR) 56.81 -0.5% +5.4%
Big Tech (QQQQ) 55.83 -0.3% +3.1%
Industrials (IYJ) 63.62 -0.3% -1.2%
Transportation (IYT) 89.47 -0.4% -1.4%
Defense (PPA) 18.20 -0.6% -1.6%
Internet (HHH) 70.21 +0.1% -3.6%
Media (PBS) 13.25 -0.6% -4.4%
Software (PSJ) 23.45 -0.5% -6.8%
Insurance (PIC) 14.99 -0.7% -6.9%
Telecom (IYZ) 21.00 +0.4% -7.3%
Construction (PKB) 11.98 -0.4% -7.6%
Biotech (PBE) 20.06 -0.1% -8.9%
Water (PHO) 16.85 -0.5% -11.3%
Financials (IYF) 49.05 -0.7% -13.2%
Semis (PSI) 13.89 -0.9% -15.0%
Basic Mat (IYM) 64.30 +0.1% -15.1%
Oil Service (OIH) 114.88 +0.7% -16.7%
Nanotech (PXN) 6.05 -0.8% -38.7%
Alt. Energy (PBW) 5.07 +0.0% -50.6%