3 Key Breakouts

Toward the end of 2012, we began telling you that stocks looked poised to move higher — a lot higher.

We told you to ignore the fiscal cliff fear mongers. Any correction leading up to the deadline would be temporary, we wrote. Overall, stocks were screaming for a move higher.

So far, it�s been a quick start to the new year — and many of our market predictions are already coming true.

Now that the market is consolidating, we�re going to review three key breakouts that have occurred over the first two weeks of 2013. Each of these charts points to higher prices in the major averages.

You should be planning your next trading move as the market continues to digest its gains from the past two weeks. Naturally, many pundits are going to question the legitimacy of this powerful rally. That�s typical behavior during important market turning points. As usual, our best advice is to ignore the headline grabbers. They know fear sells in this environment, so I doubt they will deviate from their script.

But just in case you need more convincing that stocks are in a great position to consider going long, take a look at these three important breakouts. All of them have occurred over the past 14 days — and each and every one of them points to higher prices in the near future.

Breakout No.1: the S&P 500

Last week, the S&P 500 broke out to new post-2008 highs:

Notice the dotted gray line that represents the market�s primary uptrend that has remained intact since 2009. After bouncing off support following the late 2012 pullback, the market has sprinted higher and finally topped 1,470.
It�s important to understand that trends occur in different sizes. Some are huge, while others are so tiny they�re practically unnoticeable. What we�re seeing now is both intermediate trends and the primary trend syncing up — which can be a very good time to be an investor. Clear skies are ahead for the S&P — helping to quickly win back some of the investors who took a beating in 2008.

Breakout No. 2: the Russell 2000

The index briefly posted new highs in 2011 before tanking during the debt ceiling debacle. But the start of 2013 has given us nothing but outperformance from the Russell.

The chart above is a zoomed-in look at the small-cap index. Notice the massive spike higher as the fiscal cliff deadline passed. But most importantly, the Russell is actually leading the market so far this year. The index is beating the S&P, Dow industrials and even the Nasdaq. Speculative names are running.

Risk on!

Breakout No. 3: the rest of the world
The early 2013 rally is not unique to U.S. stocks. And the rest of the world is not simply following the lead of domestic equities, either.

In fact, several countries notched their key breakouts ahead of domestic equities� January move. Mexico and Thailand are two notable examples. Both broke out to new highs in late 2012. Now we�re beginning to see various global sectors marching to new highs. Just look at the iShares S&P Global Consumer Staples Index Fund:

This is just one example of global sectors that are printing very attractive charts this month�

It�s evident that the world is beginning to turn to equities. If you�ve missed the boat so far, you�ll have plenty of time to buy when the market is consolidating — or to trade the breakouts for short-term gains. In just a couple of short weeks, countless opportunities have emerged.

Pay close attention and you�ll have a great year.