2012 Rally On Its Way?

Here’s a simple chart showing why we can see a potential rally come 2012. I still expect some type of Christmas rally, but I won’t be surprised if we don’t get it. However, with the fundamentals improving, I can definitely see us  rallying in early 2012 (anybody who says the market does not run on fundamentals long term has not seen the chart below). Of course this is discounting any “black swans”.

The chart below shows the S&P 500 ($SPX) with an overlay of the Initial Claims (inversed). You cannot deny there is a strong correlation here. As you can see, around May of this year, we had a spike in initial claims. This was followed by a drop in the market a few months later.

Right now, we are seeing a solid drop in the Initial Claims (in fact, lowest point since ~mid 2008). If this correlation follows the historical trend, we should see a pop in the market, possibly to new highs even.

And if you are worried about the Euro Crisis, do not make the same mistake everyone made in March of 2009.



(Big h/t to @Mbusigin)



The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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