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Rate Cut Rally

The chart above shows you that the rally we've had off the November lows is following the clearly defined uptrend line that I have drawn in (positive). You can also see that we popped above the 50-day moving average line (positive). It, however, didn't make a new high for December (not positive).

There are several reasons for it (positive sentiment about: the accomodative Fed, belief that we will have a stimulus package ready to be signed when the administration takes office, hope that the housing crisis can bottom in coming months as the Fed now is planning to buy securitized mortgages from banks so that they can use their new capital to make loans) , but I believe we are into a rally that will push to the 950 S&P level by year-end and potentially 1010 or even 1050 by Inauguration Day.

You'll notice that volume today was a bit higher than in recent days. The technical indicators (MACD and OBV) are both pointing upwards toward a continuation of the rally. And, probably most hopeful, you can see the upper Bollinger Band begin to curl up. A rally where the market runs up the upper green band – similar to how it ran down the lower green band on the left side of the chart during September/October – for the next five weeks until Inauguration seems like a very good possibility.

Mark