Stocks rallied back on Tuesday as the S&P 500 erased the majority of Monday's decline. The venerable Dow Jones Industrial Average went one better and managed to close at a fresh new all-time high. However, the rest of the major indices did not follow suit, which suggests that there still may be at least some degree of worry in this market.

As was discussed yesterday, the key question at this time is if any of the fears being bandied about are enough to derail the bull train. Given that the two-day pullback in the S&P amounted to less than 1 percent and the index closed Tuesday a mere 0.3% from the all-time high set three sessions prior, one could argue that there actually isn't a whole lot of worry out there right now.

S&P 500 - Daily

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However, since market tops tend to be a process and not an event, our furry friends in the bear camp continue to suggest that there are indeed issues that could cause the current rally to roll over and die. So, in light of the fact that it is better to be safe than sorry in this business, it is probably a good idea to review the bear camp's laundry list of concerns in an effort to discern if there is cause for alarm.

So, let's take a look at some of the bears' biggest worries...

All About Oil?

To be sure, oil could indeed be a longer-term problem. However, the current bearish extrapolation from the big dive in crude leading to a consolidation in the shale business, which will lead to junk bond defaults, which will cause the next credit crisis, which will jeopardize the global banking system seems like a pretty big stretch at this point in time.

It is also important for the oil bears to remember that the decline in gasoline prices is a huge plus for consumers. And since the consumer accounts for 2/3 of U.S. GDP, well, I'm just sayin'...

Is #GrowthSlowing a Problem?

Slowing global economic growth is also a biggie for the bear camp. Unfortunately though, unless you are a full-time economist, it is difficult for most investors to determine whether or not all the talk about an economic slowdown is real.

However, one of the great things about the stock market is it tends to "bake in" most of the big picture stuff. Therefore, a quick look at the charts of the areas where the growth slowdown is supposed to hit hardest might tell us a lot.

First there is China.

iShares China Large Cap (NYSE: FXI) - Daily

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Yes, it is true that growth is slowing in China. However, the chart of the FXI doesn't seem to be painting the picture of an imminent economic debacle. In fact, it appears that the iShares China ETF is actually in an uptrend at the present time.

The likely explanation here is that traders are looking ahead to brighter days - AFTER the PBoC cuts rates and the government announces more broad-based stimulus plans. Remember, stock markets tend to discount the expectations for the future. And with expectations running high for stimulus in the world's second biggest economy, there are apparently plenty of reasons to buy these days.

Next is Japan.

iShares Japan (NYSE: EWJ) - Daily

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The chart of the iShares Japan ETF (NYSE: EWJ) is a perfect example of how stocks can decline on economic reality and then rebound on government intervention and hope. No, make that massive government intervention.

In early October, stocks were diving in Japan. The abysmal GDP report probably had a lot to do with the decline. And by the middle of the month, #GrowthSlowing was definitely a concern. However, more Abe-nomics, which is also known as "QE-Infinity," kicked in as Japan announced it was upping their QE program by an eye-opening amount. Bam, just like that, stocks recovered and hope for some growth/inflation appears to have been restored.

The jury is still out on whether or not PM Abe will succeed in his quest for some inflation in Japan. But at this stage of the game, the Japanese stock market looks like it is betting on Abe.

And then there is Europe.

iShares European Union (NYSE: EZU) - Daily

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Okay, it looks like at least one of these charts is pointing to a problem. Although Super Mario has been making a lot of noise about QE coming to a European country near you, there are a couple issues to take into account.

First, the ECB is known more for talking about their bazooka than actually using it. In fact, there appears to be a fair amount of dissension amongst the ECB's governors when it comes to the topic of buying sovereign debt. Some go so far as to say that QE isn't even legal while others have said publicly they aren't sure if a QE program is even necessary.

And while the ECB members dither, the economic data continues to stink up the joint. The bottom line is there is little argument that the Eurozone isn't on the verge of recession at the present time. As such, the chart of the EZU suggests that confidence isn't high that Super Mario will actually ride in on his white horse to save the day.

But... it is important to remember that if the ECB does indeed fire their QE bazooka, stock markets around the world will undoubtedly dance higher in celebration.

In Conclusion...

In summing up the two biggest worries on the bear camp list, one can argue that falling oil prices have as many positives as negatives at this stage and that government intervention appears to be trumping fears of slowing growth in places like China, Japan, and Europe. Therefore, the bulls still might be able to put together that Santa Claus rally that brings joy to investors big and small near the end of each year. The only question now is if the worries will increase between now and the time Santa mounts his sleigh.

Turning To This Morning

All eyes are on the Services PMI data out of China and Europe this morning. The good news is that the index measuring China's services sector improved a bit in November. The bad new is that Europe's composite PMI (combining both the services and manufacturing sectors) fell to a 16-month low. Chinese stocks continued their recent rally and European bourses are none the worse for wear today. In other news, there was a nuclear accident in Ukraine overnight but the Ukraine energy minister said the accident at its Zaporizhzhya nuclear power plant posed no danger. Here at home, the battle over the budget is heating up. Recall that the government is funded through December 11. On the Holiday Shopping Season front, the recent flurry of e-commerce data seems to be improving the view of how things are going this year. comScore reported that e-commerce sales between Thanksgiving Day and Cyber Monday were up 24% year-over-year to $6.6 Billion, which was above the 22% growth rate seen last year. U.S. stock futures point to a flat open on Wall Street.

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell...

Major Foreign Markets:
    Japan: +0.32%
    Hong Kong: -0.95%
    Shanghai: +0.60%
    London: -0.22%
    Germany: +0.21%
    France: -0.05%
    Italy: +0.62%
    Spain: +0.82%

Crude Oil Futures: +$0.32 to $67.20

Gold: +$3.30 at $1202.70

Dollar: higher against the yen, lower vs. euro and pound

10-Year Bond Yield: Currently trading at 2.295%

Stock Indices in U.S. (relative to fair value):
    S&P 500: +1.05
    Dow Jones Industrial Average: +1
    NASDAQ Composite: +2.89

Thought For The Day:

Two monologues do not make a dialogue. -Jeff Daly

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David D. Moenning
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President, Heritage Capital Research
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