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3 Buys From A 'Seasoned' Timer

 December 19, 2012 10:32 AM

(by Sy Harding, editor Street Smart Report) Our annual Seasonal Timing Strategy re-entered the stock market on November 23; the market's favorable seasonality is now in place until next spring.

Given our seasonal buy signal, we have added several new ETF positions to our model portfolio including iShares Dow Jones Transportation (IYT), iShares Canada (EWC) and Vanguard Emerging Markets (VWO).

We had been saying for several weeks that the consensus of our indicators was mixed and therefore neutral, but that they were potentially very close to a buy signal.

The indicators finally improved enough to trigger that buy signal, including that the S&P 500 broke above the resistance at its 20-week moving average, and is now in the usually bullish upper half of Bollinger Bands.We've been noting for some time how the DJ Transportation average has been in a very narrow, low volatility trading range all year, and how Bollinger Bands had narrowed significantly as a result.

[Related -How Worried Should We be About a China Slowdown?]

Such periods are often followed by larger moves in one direction or the other. For awhile it was looking like the transports might be about to lead the way down.

But with our new buy signal on the market, and the transportation sector, and the arrival of the market's favorable season, it is looking more like the breakout will be to the upside.

Vanguard Emerging Markets has broken out of a symmetrical triangle formation to the upside. It has broken out above its 20-week m.a. and pulled back to successfully retest the support there, and intermediate-term indicators are on buy signals.

[Related -The Demise of the BRICs?]

Unlike the U.S. market, emerging markets have been in a significant correction since April of 2011, and should outperform the developed nations if they are to also get back to previous levels and move on to higher highs as the Dow and S&P 500 have done.

We liked the Canadian market for some time, but were reluctant to take a position until we had a buy signal on the U.S. market. It has already been in a bear market since early 2011, anticipating the economic slowdown Canada has been experiencing, and appears to be pulling out of it.

Our intermediate-term technical indicators have triggered a buy signal on the Canadian market and the iShares Canada ETF has broken out above its 20-week moving average, is in a potential pattern of higher lows, with potential trendline support just below current levels.

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