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The Next Leg, Up or Down

December 7, 2011 – 5:54 pm

Though the Christmas rally is still in place its future for the rest of the year, and in this case the month of December, depends on what the Europeans do this week.

They, the Europeans, are having significant meetings again this week and the market expects some decisions that may not solve the problems but will at least clarify the direction they are going to take. Even if they kick the can down the street the stock market will want to see how far and in what manner that kicking will take.

I realize writing and talking about Europe, droning on and on about what Germany and France are going to do and whether Italy will rein in their debt, to say nothing of Greece is boarding on the moronic. However, though I think the EU is in recession, no matter that the numbers haven’t established that yet, the depth of that recession could push us into a recession as well. I say ‘could’, not ‘will’. But what the different parts of the EU political and financial entities decide this week will set the tone for our stock market this month and next.

Yes, the Christmas rally is here but will it stay? History says the odds are good as the pattern is very strong, but there are always exceptions. Without a catalyst coming out of Europe the rally could well sputter. If we get that catalyst it could result in a very strong upward leg.

Good Trading
Steve Peasley

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