Two key technical tools that I rely on in my stock or ETF recommendations are volume (Volume Always Precedes Price) and relative performance analysis. As discussed previously, picking positive-volume stocks that are in the strongest industry groups or the strongest sectors will give you the best odds of success.
The strong performance of the stock market in the last quarter of 2013 caught many by surprise as the Spyder Trust (SPY) hit a low of $164.53 on October 9 and has since made a series of higher highs. The price action has been confirmed by the S&P 500 A/D line as it has made higher highs, line a, and higher lows (line b).
The SPY has also continued to stay above its quarterly pivot level on a weekly closing basis since the last week in November of 2012. The 1st quarter pivot for 2014 is at $177.97 with the R1 resistance at $191.41 (see full table below).
Since the close on September 30, the SPY is up 9.7%, which compares nicely with the 10.27% annualized yearly return of the past 25 years. After the stellar performance in 2013, one may need to be reminded that the S&P 500 was up just 13.29% in 2012 and was unchanged in 2011.
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Since the end of September, there are quite a few industry groups that have done better than the Spyder Trust (SPY). The table includes three of my favorites led by the DJ Consumer Electronics (DJUSCE), which is up 27.8% over the same time period.
Once I have identified the industry groups that are performing the best, I then look at the group technically across the monthly, weekly, and daily charts. If the group passes these tests, then one can use my favorite research sites to identify individual stocks that offer good buying opportunities.
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