Will There Be a Christmas Rally?

The answer to that question will probably come from Europe, which is influencing the direction of the U.S. stock market. Right now, Europeans are struggling to contain their debt crisis, among other problems. Back in the U.S., the housing market is unlikely to recover anytime soon, but that won’t stop most people from shopping, which could give us a good old-fashioned Christmas rally. The excitement of the holiday could encourage investors to go on a buying spree.

On the other hand, if you look at the charts (below), there is major resistance at the 50-day and 200-day moving averages. The S&P tried to break through its 200-day moving average last week, but didn’t succeed. If I were placing odds, I’d go with the moving averages. It should be another volatile week.

I’m writing several articles on 2012, and many people are predicting a very bad year. It makes me wonder if the U.S. market will surprise everyone and rally. After all, although things are rough here, they’re even worse in Europe. It’s possible that investors are going to look around and discover that the U.S. is the safest place to park their money.

The wild card is China, and whether they will continue growing. Some analysts predict that China is full of future investment opportunities, while others claim their market is due for a nasty fall. 

So will there be a Christmas rally? At the moment, it’s too early to predict what will happen. I can promise this: it won’t be boring.

Source: Stockcharts.com