Three Sectors Ready to Lead 2011 (IJR, XLK, FDN)

The predictions are in and today begins the 2011 market year. I have read everything from the markets crashing to a 50% gain in equities this year. As with every year only time will tell and the key is to take what the market gives and be disciplined enough to capture the move up or down. The one word that summarizes all the discussions is optimism. In fact, that is the one word I would use to describe the year, optimism. The outlook is optimistic the economy will improve, jobs will grow and the overall global economic picture will be healthy.

With that in mind there are three sectors to watch as we begin the new year. First, small cap stocks (IJR), the January effect revovles around small cap stocks. The statistics show January is the month that sets the tone for the sector. Thus, we should pay attention to the sector heading into the new year. Technically the small cap stocks have been performing nicely already. In December IJR was up 7% for the month. One would have to ask if the January effect came in December as the Santa rally came in early December versus the end of the month? I still like the outlook for the small cap stocks and for that matter mid-cap (IJH). The chart below shows the pullback to support last Friday and the solid uptrend in play as we begin the new year. (more)

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