Will There Be A Christmas Rally

This is turning out to be quite an exordinary year. One should not be surprised about anything that can or will happen in the market anymore. We have TARP to bail out financial companies, negative yield on U.S. Treasury, and the pending auto industry bail out, and a constant stream of politically motivate maneuvers that just prolong the inevitable for the market to fall to its appropriate level, and for the miss managed companies to run their appropriate course.

Prior to today's market opening, the Asian and European markets have dropped a few percentage points, and the future on the U.S. market is indicating a big drop for the U.S. market as well due to the failure of the Senate to go along with the auto bailout bill the House has passed. Soon after the U.S. market opened and after it has dropped more than 200 points, the White House has made an 180 degree above face to go from against to in favor of using the funds in TARP to bail out the auto industry. For weeks the White House has objected the proposal from the Democrats to use the TARP to bail out the big 3, and now having the Senate Republicans rejected the bill the House has passed, and with the market appearing to have one of those big drop day, the White House issued a press release to announce it has changed its mind and now will use the TARP funds to help the auto industry. Soon after the White House announcement, the market started to firm up and recover its losses and ended the day with a modest gain.

Well, history has shown no matter how the market is being held up artificially, it will run its course in due time. Take a look at the charts below. The DJI, SP500 and Nasdaq 100 are all forming a bear flag from the recent rallies. When these flags are broken, the market will be at the level that it is meant to go...new low.

To see a larger image of the charts and to read the commentary about them, point the mouse to the chart and click.





Will we be getting a Christmas rally? That will be depended on if the market decided to break the bull flag that is inside the bear flag first, or if the market decided to simply terminate this upward move and break the bear flag. Soon the politicans will be gone for their holiday break, and the market will be able to move based on market forces and not based on politics to let us know which direction it has decided to take. Keep monitoring the market and be careful on not getting trapped by the bear market rallies. I'm still waiting for the market to tell me it has bottomed, not those talking heads on TV proclaiming they believe the market has bottomed.