I wish all of you a happy and prosperous 2013! The market had a good week, rising 1.7%. VIX, the CBOE measure of volatility, came rushing down from over 22 (the last time I checked) to under 14. It’s at the lowest level in the last three months, implying that the market should be relatively stable at this level. Some people like to think that the first week of January is an indicator for how the rest of the year will go. Others believe that the entire month of January is a portent for the year. I think those are superstitions.

Stocks have again regained the momentum advantage over bonds. The advantage remains slight, but looking back over the last few months, stocks have been in favour with only a brief interlude for bonds. I will continue to watch for strength in the stock market. Corporate earnings will soon be released for the fourth quarter and will likely set the mood for the market.

Within the asset classes that I monitor, FXI (Chinese stocks) continue to present the greatest opportunity. Within CDN$ ETFs, XEM and XIN show the best momentum. I continue to own XIN through the coming week, mostly to keep down trading costs (rather than switch to XEM).

Market Outlook January 7, 2013

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