Xmas Rally or Not?

The Dow is at an 18-month high. So is this the Santa Claus rally, a prelude to next year suggesting we get in now or is it a thin market rally ready to fizzle - nonsense on stilts?

I am expecting US rates to remain on hold and that to fuel support if not an outright rally. There are funds out there who will sell into 10,000 on the Dow until next year. The issue is whether there is a sufficient quantity of money willing to push through 10,000 on the Dow.

FTSE and US

For the FTSE 100, I continue to hold for a close above 4450. The US markets are concerned by growth figures and employment (will it be a jobless recovery - which is therefore not as confidence building as one where jobs are created). The main problem is that companies are willing to invest now in IT, infrastructure, but not in jobs as yet. Of course there is the outsourcing pressure too.

Companies - momentum

So which companies have been doing well in this environment? ARM has done well of late. Expect some profit-taking if the IT sector profit takes. 118p-120p is the price support level which should not be broken for this short-term uptrend to continue.

Big Food is storming ahead. A month's worth of declines on profit taking would not be of surprise, but for now there is ample strength. Carlton and Grainger Trust are also on the radar for their strength.

Companies - Value Growth

What about rises showing value based on price and growth based on earnings and revenue. Grafton is one which jumps out. Next, Ottakar's. This was a pick of mine on Bloomberg TV back in 2002 when it was around 120p. You would have tripled your money if you followed it from back then.

Despite the rally, Robert Wiseman Dairies, is still rising with value and growth in place. ROK Property Solutions looks ready to rise again too.

The main criteria for choosing these stocks is 'bottom up', that is look for specific criteria based on value then superimpose growth criteria to filter again and finally add a momentum filter for a '3 filter' system. Top-down would be to look for the best sectors and work your way down.

So there you have a few good companies on my trading screen presently based on various criteria. For those who like 'shorting' - Bae is looking weak - appropriately enough in the season of goodwill and peace I suppose!

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