Trend Following in 2010

Given the roller-coaster ride that was 2009, what's in store for the new year?

Well, I think we'll see more of what we saw in the last few months, rather than what we saw in the spring and early summer.

I think this will be the case for the first part of the year, with a gradually run-up -- perhaps to 1200 in the S&P 500 -- by the end of the first quarter. That would be a solid 7% gain.

Why am I so optimistic? Give me a reason, any reason, not to be.

Although the market may be slightly overbought, there isn't anything bearish show up other than some short-term sentiment.

The usual suspects (tech, commodities, coal, fertilizers and metals) are likely to be the better performers.

Hit the Ground Running

It's important to get off to a good start in the new year. For me, that was a challenge in 2009. We started the year with an historic high in volatility, a new president about to take office and the world still gripped in the clutches of a financial meltdown.

Certainly, if you thought the low was in Thanksgiving 2008, you were sadly mistaken. The first couple of months saw markets swoon nearly 30% or more. At that rate, they would have gone to zero by July 4!

However, the trend was still down and the bears were making big coin.

That trend changed quickly in early March, and the bulls started to gain big-time.