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Kent Thune

Can Stocks Hold Multi-Year Highs?

By January 30, 2013

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Traders employing technical analysis are reaching a decisive moment because stock prices, as measured by the S&P 500, have surpassed the 2012 peak of 1474.  Also, as I write this, the S&P has held at or above the next resistance level of 1500 for the past two trading days. Adding to the drama, the Dow Jones Industrial Average is flirting with the psychological 14,000 mark. But does anyone other than traders really care?

Highs For Stocks Matter For Some More Than Others

Investors using fundamental analysis and the buy-and-hold crowd don't care about support and resistance levels on the S&P 500 but they may be feeling fairly confident in their respective strategies, at least for the past few years anyway.  For traders, curious onlookers and people nearing retirement, the market is either creating anxiety or anticipative interest.

For tactical asset allocators, which is the category to which my strategy has the most parallels, now is not the time to exit stocks but it may be a time to take some baby steps away. For example, it is anyone's guess if stocks will begin a new bear market in 2013. However, it is reasonable to expect that a sustained decline in stock prices will occur within the next 12 to 18 months.  Therefore, those with time horizons of less than 3 to 5 years will want to be a bit more cautious at these multi-year highs for stocks.

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