The stock market rally on Friday, after awful news on jobs, and today’s follow though is a bullish sign for the relatively short term. I suspect the market will continue to rally over the next few weeks at least as investors turn more optimistic over the new Obama administration. While I do not believe the reported stimulus plan will be effective, the results won’t be known for many months so in the meantime, the market could recover more of the losses from October and November. Here’s a chart of the S&P 500:

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The initial target is the 1000 level that was the rebound high from the October lows. If we are able to take out that level the next target would be around the 1100 level. The best guess at this point is a move to 1000 followed by a pullback that hopefully stays above 900 and then a second move to the 1100 level. That is the optimistic scenario. Full Disclosure: As a firm we may have some clients buying the S&P 500 etf to take advantage of this move. It isn’t for everyone but for those who can handle the risk, this seems a good speculation.

Another market exhibiting bullish tendencies is the Chinese market. Full Disclosure: We own and will probably be buying more of the I Shares ETF FTSE/Xinhua 25 index fund (FXI):

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The short term target is the mid 30s and the longer term target is 40. I am of the opinion that when the financial system is stabilized that the best growth and the best stock markets will be outside the US and particularly Asia. As Bill Fleckenstien points out in this article at MSN, the Chinese didn’t have the credit binge that we did and are therefore better positioned to recover. Keynesian stimulus will have a hard time working here where it means adding to our debt load, but China has excess capital it can spend and their stimulus plans should be more effective.

I am also feeling more bullish on the gold market. It hasn’t broken out of its range yet but the dollar may be peaking. Here’s the dollar versus the euro (currencyshares etf FXE):

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Gold generally moves inversely to the dollar so if the dollar fails here, gold should go higher. Here’s the I Shares gold ETF (IAU):

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Initial target is the recent high at 82. Longer term I am looking for gold to make new highs somewhere over 1000. Full Disclosure: As a firm, we own IAU for our clients and may buy more if price action warrants.

In conclusion, stocks are acting much better but the volatility is still pretty extreme and likely to continue. China’s market is recovering and their economy is probably better positioned for recovery than the US. The dollar may be peaking and gold is acting well.