The market has been very oversold for the past two weeks, so it did not take much of a spark (agree to agree on the fiscal cliff) to get things rolling. What we are observing here is a short term rally based on news for the political side but we need some confirmation from real economic indicators to verify if the correction is over.
One index I am keeping my eye on is the transports, without their participation in this rally then the spark could fizzle. However, I do not see much more of a selloff here anyway even if the transports still lag. Retail sells this weekend could add some fuel to the fire but the chicken hasn’t hatched yet or should I say turkey.
Therefore, I am remaining cautiously bullish due to the behavioral mode of investors that remain on the sidelines. My Santa Claus approach is, I am making a list of ideas and checking it twice so if this short term becomes long (concerning the recoil rally) we may find some sugar plums in our stockings.