Two 2011 Stock Market Themes

We're sliding into the year's end.  There aren't many trading days left, and as far as I am concerned, it has been a lousy year to be an investor - especially a growth investor.  There are two good examples as to the tone of this year's market.

The first example is the strength we've seen in many of the defensive stocks and sectors, especially those stocks in the Utilities sector.  Some prognosticators consider a correction over 15% a bear market, so in their thinking, we've had back to back bear markets, which means that we've also had back to back years in which "defensive" stocks ruled the performance parade for much of the year.

Another major theme this year has been the short-term volatility.  As you know, our discipline is based on investors instead of traders.  Yet, it seems the traders have taken over the market, as the investors have slinked deeper into their bomb shelters.

Looking at the internal stock market, as measured by the percentage of stocks in the S&P 500 and S&P 400 trading above their 50- and 200-day moving averages, you can see the market is still making methodical progress to recover from the decline in August.

Lastly, there has been some discussion about the "breakdown" of gold recently, so I wanted to share the next chart from our website that shows the price of gold versus the Euro, the Japanese Yen and the US Dollar.

Click on the image above to view a larger chart.

In that chart above, you can see the real breakdown came in the price of gold versus the US Dollar, which is good news for our stock market as that money looks for a new home.

Don Hays

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