ETFs Register Gain During First Five Trading Days of 2012

Stocks and ETFs ticked higher yesterday and the “first five days” register a gain. Major U.S. stock market indexes ticked higher yesterday ahead of earnings season which was kicked off Monday by Alcoa (NYSE:AA)

The Dow Jones Industrial Average (NYSEARCA:DIA) gained +0.3% while the S&P 500 (NYSEARCA:IVV) added 0.2%. The S&P 500 is now positive for the first five days in January which is positive for the markets because as my friend, Jeffrey Hirsch of Stock Traders Almanac notes, “Early Indicators are Two For Two.”  Over the last 39 years, a positive “first five days” indicator has an 85% accuracy rate in predicting positive outcomes for the full year.

Alcoa (NYSE:AA) was the widely watched issue yesterday as it gained +2.9% in the regular session.  The company reported earnings after the close and checked in with a $193 million fourth quarter loss compared to a profit of $258 million a year ago. But revenue was up 6% and analysts were forecasting a loss.  Problems in the European market were blamed for the loss but the company expects an increase in demand for 2012.  Alcoa (NYSEARCA:AA) is in a solid bear market from a technical standpoint with its shares well below the 50 and 200 day moving averages.  The shares of the company were up slightly in after hours trading.

The Materials Sector (NYSEARCA:XLB) gained +0.2% on expectations of continued decent demand in the  materials sector and the sector showed slight gains in after hour action.  In other news, German Chancellor Merkel and French President Sarkozy met yet again in Berlin and promised to move forward in their efforts to contain the European debt crisis.  European markets declined but in U.S. trading, most European ETFs made decent gains.

U.S. consumers went on a debt spree in November, adding the most debt in 10 years so either we’re feeling more confident or we don’t have enough money to buy the things we want.  Either way, the concept of de-leveraging seems to now be in doubt.  However, the consumer powers 70% of the U.S. economy and so confidence here can only be a help.
Apple (AAPL) hit an all time high and semi-conductors powered higher, along with a hot regional banking sector.

Bottom line: Consumers want to buy, banks which have been beaten down, are on the move, and January indicators including the “Santa Rally” and “the first five days” indicator cast a potentially positive light on 2012.  If Europe can stay solvent and earnings are decent, we should see higher stock market and ETF prices ahead.

Disclaimer:  Wall Street Sector Selector actively trades a wide range of exchange traded funds (ETFs) and positions can change at any time.