Is this the Santa Claus Rally ?

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The European debt crisis suddenly seems to be on the mend. Everything looks like being worked out. No not really. Its because the stock market was getting way oversold in a Flag like chart pattern. When that happens the market bounces off from the lows. This pattern has been forming for the last 2 weeks and you can see this on the chart here.

Every time a European official opens his mouth the market seems to drop. But how long this will go on? Some day Europe may have to survive and things will be working out. That may be happening now as there are some good news hitting the trader screens.

Though things look rather optimistic on this side of the Atlantic in the US where declining unemployment claims and sputtering manufacturing is coming along just fine. “There do appear to be some improving economic indicators domestically, but it’s hard to see how they win the day if Europe continues to be a big concern. It’s not like the valuations are at such bargain-basement prices that it becomes a one-way bet,” said Stephen Massocca of Wedbush Morgan in San Francisco.

If the market does not rallies how would the year end look like ? The S&P would pancake with yearly losses and the returns would be terrible for 2011 and many asset managers don’t like to see that.

We keep an eye on this breakout. If SPX moves higher you know Santa Claus hasn’t failed you. Need to know how this is done? Click here

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