It's that time of year when prognostications abound about what's in store for 2013.

Stick with the home builders! Embrace the financials!

Editors and producers love predictions. Sure, it helps clicks and ratings and makes for great headline fodder but for individual investors, it's not very useful information at all. It's more noise that investors would be better off shutting out.

Don't let the headlines tell you what to buy in 2013. Unfortunately many investors do, and they end being in the wrong stocks. Instead, let the market tell you what to buy. Institutional buying will uncover the new leadership in 2013. Right now, there's still a lot of money on the sidelines so it's impossible to tell where the new leadership will come from at this point.

It's possible that the home builders will continue their run in 2013 but not before they consolidate gains and take a breather after a lengthy run. Between November 7-15, the iShares Dow Jones U.S. Home Construction Fund (ITB) fell in above-average volume, a sign of at least some institutional selling. Home builders look ready to surrender their leadership for now. They could lead again in 2013, but not without renewed signs of institutional buying.

Leadership could also come from the financials in 2013 but it's too early to say. The Financial Select Sector SPDR Fund (XLF) is setting up in a nice base, but it's not under accumulation yet. Perhaps it will be soon. Don't buy in anticipation of it happening. Wait for it to happen first. Watch for above-average price gains from here. Volume expansion always flags institutional buying -- or selling.

Meanwhile, health care stocks are always a good source of leadership, but it's a big sector so it's important to be in the right sub-groups. Some health care sub-groups will do well in 2013 -- others won't.

Strong fundamentals and bullish price and volume trends at medical-device maker Varian Medical Systems (VAR) means the stock has the potential to be a leader in 2013. The company's systems and software are used for treating cancer. It's in a bullish technical set up that could yield an upside breakout soon. It has a consistent track record of growth and shares remain under accumulation. It's been holding gains smartly after its earnings-inspired gap up on October 27. Price action like this can often presage additional price strength.

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