For the moment, the momentum in the U.S. market seems to be up. If you look at the chart, the previous resistance zone between 1215 and 1230 was broken, and is now functioning as support. Moreover, when you look at a daily chart since the October 4th low, price action simply appears to be taking a break before the next move up. On a measurement basis, you could make the case that we might see new highs on the year before 2011 is out.
The caveat, of course, is what happens in Europe. It remains a crapshoot since Greece did not accept the terms of the most recent Eurozone plan (not that it was a long-term solution, anyway). Thus, uncertainty remains. And an uncertain market, in my view, usually has a negative bias. The counter point is that we are likely to see more QE activity out of the various Central Banks. Even the ECB, under new leadership, is perhaps more apt to engage in such behavior. Which will be bullish for stocks, but not indefinitely. Then, there is the growing buzz around NGDP targeting -- in essence, it's money printing by yet another name.
So, taking all these factors together, I tend to expect higher prices before lower.
