Are Bulls Patiently Waiting to Charge a Big U.S. Stock Rally?

After last week’s fireworks, stock market bulls need a knockout to seal the deal

Last week was certainly a wild ride on major U.S.  indexes as the Dow Jones Industrials (“Use Dips To Take Advantage of Year End Rally”).  Let’s all hope that Jeffrey is correct because, although we can make money in down markets, it’s a lot easier and a lot more fun to make money when the markets are going up. (Think Santa Rally)

This week brings important economic data including retail sales on Tuesday, industrial production Wednesday, weekly employment and Philly Fed Thursday and October leading indicators on Friday.

What It All Means for ETF Investors

What this all means is that we’re due for the traditional “Santa Rally” from now through the end of January, even as Europe burns and economic uncertainty abounds.  In spite of all of the negative news, technical indicators say that there is more upside ahead and seasonality would support this view.  Unknowns are the situation in Europe and the results of the “super committe’s” deliberations due to be complete by November 23rd.

My high level view is that we’re most likely going to have a substantial rally from now into the end of the year based on the technical picture and the boost from the traditional year end “Santa Rally” and “window dressing” from institutional asset managers who are eager to dress up their returns in time for Christmas bonus season.  Italy probably isn’t going to collapse between now and Christmas and Silvio’s departure this weekend further sets the stage for a “relief” rally over Europe.  Longer term, however, the skies grow considerably darker as this game of musical Prime Ministers does nothing to solve Europe’s real problems.

This weekend I was in Honolulu where Prime Ministers and Presidents from the United States, Japan, China, Russia, Philippines, Brunei, Chile and other Pacific Rim countries gathered for the annual APEC (Asian Pacific Economic Cooperation) convention.  The city was filled with dignitaries, motorcades, police, Secret Service men talking into their wrist watches and SWAT teams on the rooftop of my hotel, along with closed roads and amazing traffic jams.  Let’s hope that progress was made as the Pacific Basin becomes increasingly more important in economic and geopolitical terms.

Suddenly I realized that it’s actually November, (11/11/11) and that the year is nearly over, and a number of Veteran Day’s ceremonies were held by visiting dignitaries at ”Punchbowl,” the National Memorial Cemetery of the Pacific.  Veteran’s Day, November 11th, was originally the day of the Armistice agreement, November 11, 1918, that ended World War I on the eleventh hour of the eleventh day of the eleventh month in 1918.  Let’s take a moment to acknowledge the long line of Americans who have died to preserve our freedom.

Disclosure: No positions in ETFs or stocks discussed in this article.

John Nyaradi is the author of The ETF Investing Premium Newsletter.