WINDERMERE, Fla. (Stockpickr) -- The stock market is off to a very bullish start in 2011. The Dow Jones Industrial Average and the S&P 500 are both up around 6% year-to-date, and the tech-heavy Nasdaq is up about 6.3%. Those are some solid gains when you consider that we're only about a month and a half into 2011. Clearly, if you've been betting against the market by shorting stocks, then you've been fighting the trend and missing out on making some nice profits.
"As goes January, so goes the stock market for the year," is the old adage on Wall Street. Basically what this means is that if the stock market goes up in January, it will continue to trend higher for the rest of the year, or if it goes down in January it will trend lower for the rest of the year. Well, this year the Dow Jones Industrial Average has registered its best January performance since 1997, a gain of 2.72%. The S&P 500 rose 0.77% in January, which marked its best January performance since 2006.
All this really means is that the probability for higher prices for the rest of the year in U.S. stocks is statistically strong. It by no means says that higher prices are a certainty. Since 1945, whenever the S&P has trended higher in January, it's continued to trend higher an average of 11.6% during the next 11 months of the year. Again, statistically, this is great, but statistics can't factor in the unknown like a potential destabilization of the entire Middle East like we've already seen in Egypt.
Related: 3 Stocks Setting Up to Break OutNow that we've determined that the market is clearly in an uptrend to kick off the year, let's take a look at the market leaders, or the best performing stocks of 2011. I am a dedicated trend follower, so to me it's very important to my market discipline to always be focusing on the stocks that are leading the market. These names will often continue to outperform for months and can offer market players the best opportunities to make the big profits. For whatever reasons, money managers are snapping up shares of these market leaders because they think that these stocks are going to go much higher. Some have great fundamental stories or new products coming onto the market and some are just in the right sectors that are seeing a rapid increase in money flow. The bottom line: These names need to be on your trading radar because the trend could still be early in these stocks. These names could continue to trade up higher for the foreseeable future.
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