Last week, the spotlight of worry was back on Greece’s solvency. This week it is Spain’s turn again to spook us. Greece, Spain, and Italy are in economic disarray, and the prospect of growing their way out of trouble appears unlikely given the recessionary forces. Even emerging market darlings like Brazil, China, and India are struggling. Although U.S.

Today’s trading began amidst a multitude of unpleasant factors.

Bulls found fresh legs on Wednesday with support from the FOMC, despite the reluctance of Greece to “play ball” with its creditors, which has been depressing investor sentiment. Everyone seems to agree that the unresolved debt crisis in Europe is the main thing holding back global economic recovery and the snorting stock market bulls. To be sure, the situation in Europe is not good.

The “risk-on” trade seems to be hanging tough as more than a passing fad. Risk-off means that money is flowing into safe havens like U.S. Treasuries and solid currencies like the U.S. dollar and Swiss franc; whereas risk-on means that money is flowing into more speculative assets like equities, commodities, emerging markets, and higher yielding currencies.

Stocks are maintaining their bullish sentiment for the New Year. The proverbial “wall of worry” remains high and intimidating, but bulls traditionally prefer it this way. It makes the less optimistic investors keep a store of cash, and it keeps the bears pumping money into short positions—both of which can provide fresh fuel for stocks when idle cash gets put to work and the bears start covering their shorts.

Bulls are trying mightily to ensure the Santa rally holds into year-end and close the year in the positive, as all eyes remain on Europe.

Okay, Virginia, Maybe There is a Santa Claus . . .

Market Rally Continues But Not Sure Why...

By David Brown, Chief Market Strategist, Sabrient Systems