The question of the day (in this business, sometimes knowing the question is more important than having the answer) is whether or not the current joyride to the upside, which has taken the S&P 500 up nearly 100 points (97.91 to be exact) or +4.96 percent in just 3 days, can be trusted.

From a pure technical standpoint, a blast like the market saw last week is referred to by some analysts as a "thrust," which has historically been a harbinger of good things to come. The thinking is that if a market surges higher in a very short period of time, buyers must be anxious to get in. Thus, a blast in prices is usually accompanied by additional gains down the road.

To clarify, none of the indicators which measure a true "thrust buy signal" in terms of either price, breadth, or volume, have flashed green as of yet. However, should the current jaunt go on much longer, there will likely be green flags waving from this group.

The problem though, is at the beginning of last week the market appeared to be fraught with risk. The S&P had just fallen 5 percent in just 7 sessions on fears about oil, high yield defaults, Russia, deflation, etc. And then, before you could find a chart of oil dating back to the 1980's - BAM! - the market has returned to all-time highs.

One of the first things to note about the recent action is that "V" bottoms have been the norm in 2014. Once each and every decline became ugly, something came along to cause traders (or perhaps more accurately, traders' computers) to simply "go the other way" - in a hurry.

S&P 500 - Daily

View Larger Image

There has been no basing activity. There have been no retests. Nope, every "dip" has been bought - and usually in a rather aggressive fashion.

Therefore, the thinking is that this time will be no different and that it is likely to be up, up, and away from here.

Should We "Trust the Thrust?"

Ned Davis is famous for coming up with iconic phrases such as "Don't fight the Fed" and "Don't fight the tape." However, another phrase that the firm's clients are quite familiar with is, "Trust the thrust." Again, the historical data suggests that a thrust in the market tends to usher in strong gains over the ensuing 30 days as well as the next 3-, 6-, and 12-months.

However, this time around, the move feels more than a little "news driven" and as such, could be more a case of high-speed trading algorithms doing their thing each day.

Reasons For the Move

The excuses du jour for the blast higher have been many and varied. First there is the topic of oil.

U.S. Oil Fund ETF (NYSE: USO)- Weekly

View Larger Image

Traders know that the type of crash that is happening in oil prices has to end somewhere. However, given the devastation that has already occurred and the fact that lots of folks are talking about lower oil prices ahead, traders have been reluctant to try to "catch a falling knife."

Yet, one of the reasons given for the recent surge in stock prices has been the idea that oil prices have stabilized over the last 4 days. The idea is that if the worst of the dive is over, then the global economy might be okay going forward.

U.S. Oil Fund ETF (NYSE: USO)- Daily

View Larger Image

On the topic of stabilization, another reason for the move up in the stock market has been the improved action in Russia.

Market Vectors Russia ETF (NYSE: RSX)- Daily

View Larger Image

The question of course, is if the violent drops in oil, Russia, and the emerging markets is over. To be sure, the first step to ending these waterfall declines is for prices to stop falling. Next, would be a reflex rally. Then a retest of the lows. And finally, the base-building phase. So, it is safe to say that at this point in time, it is still early in the process.

The Fed and the Calendar

Other reasons for traders suddenly hopping back on the bull band wagon include the Fed and the calendar.

The "liquidity trade" has been a big deal in the market for quite some time now as all that money being printed by central bankers has to go somewhere. And since money tends to go where it is treated best, a great deal of the fresh cash has found its way to the U.S. stock and bond markets.

The worry though has been that the Fed would ruin the party by pulling the punch bowl prematurely. Everybody knows that "fighting the Fed" is a bad idea and as such, if the Fed were to begin raising rates before June of next year, well, it could become a problem...

However, with Janet Yellen deftly swapping "patient" for "considerable time" last week, traders can now rest assured that unless the U.S. economy gallops higher from here, the Fed isn't likely to do anything unexpected.

And then there is the calendar.

Whether you prefer to call it the "year-end rally" or the "Santa Claus rally," the bottom line is that stocks tend to be sloppy in the first half of December and then rally in the second half. Therefore, it isn't terribly surprising to see that traders and their computers have been falling all over themselves lately trying to get into the seasonality trade.

And then when you consider that 2014 has been a disappointing year for most managers (remember, although the S&P is up 12 percent year-to-date, the average stock is up only 1.3 percent in 2014!), the combination of dip-buying and performance anxiety seems to also be prompting managers to simply hold their nose and put any/all available cash to work here.

Which brings us to the title of this morning's somewhat meandering market missive: Can they be trusted (meaning the "V" bottoms)? The answer would appear to be, yes - for now.

However, if oil/Russia/high yields were to start diving again, it could be another story entirely...

Happy Holidays to all!

Turning To This Morning

Stocks enter this Holiday week in a positive mode. Wall Street rallied on Friday. Oil is trying to stabilize. Russia isn't tanking. High Yields are rebounding. And so, it isn't terribly surprising to see that foreign markets are higher across the board this morning. However, the focus continues to be on the price of oil. And it is a decent bet that if crude begins to break down again, so too would the recent buoyancy seen in the stock market. In fact, futures in the U.S., while still green, are off their highs in response to crude giving up early gains. But for now, it appears that Santa has once again delivered to Wall Street.

Pre-Game Indicators

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

Major Foreign Markets:
    Japan: +0.08%
    Hong Kong: +1.26%
    Shanghai: +0.59%
    London: +0.99%
    Germany: +1.28%
    France: +0.81%
    Italy: +0.50%
    Spain: +0.15%

Crude Oil Futures: -$0.39 to $56.74

Gold: -$0.80 at $1195.20

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

10-Year Bond Yield: Currently trading at 2.183%

Stock Indices in U.S. (relative to fair value):
    S&P 500: +8.55
    Dow Jones Industrial Average: +82
    NASDAQ Composite: +6.02

Thought For The Day:

The only way to do great work is to love what you do. -Steve Jobs

Looking For Guidance in the Markets?

The Daily Decision: If you want a disciplined approach to managing stock market risk on a daily basis - Check the "Daily Decision" System. Forget the fast money and the latest, greatest option trade. Investors first need is a strategy to keep them "in" the stock market during bull markets and on the sidelines (or short) during bear markets. The Daily Decision system was up 30.3% in 2012, is up more than 25% in 2013, and the system sports an average compound rate of return of more than 30% per year.

The Insiders Portfolio: If you are looking for a truly unique approach to stock picking - Check out The Insiders Portfolio. We buy what those who know their company's best are buying - but ONLY when they are buying heavily! P.S. The Insiders is up over 30% in 2013 and has nearly doubled the S&P 500 since 2009.

The IRA/401K Advisor: Stop ignoring your 401K! Our long-term oriented service designed for IRAs and 401Ks strives to keep accounts positioned on the right side of the markets. This is a service you really can't afford not to use.

All StateoftheMarkets.com Premium Services include a 30-day money-back guarantee!

Wishing you green screens and all the best for a great day,

David D. Moenning
Founder and Chief Investment Strategist
StateoftheMarkets.com
President, Heritage Capital Research
Check Out the NEW Website!

Positions in stocks mentioned: none

For up to the minute updates on the market's driving forces, Follow Me on Twitter: @StateDave (Twitter is the new Ticker Tape)

Free Research From StateoftheMarkets.com:

Remember, you can receive email alerts for more than 20 free research report alerts from StateoftheMarkets.com including:

• State's Chart of the Day - Eeach day we highlight a top rated stock with a positive technical setup
• The Risk Manager Report - Stay in tune with the market's risk/reward environment
• The “10.0” Report - These are the REAL best-of-breed companies
• The Insiders Report - See what the people who know their company's best are buying
• ETF Leaders Report - Looking for the top performing ETF's? You've come to the right place.
• The SOTM 100 Portfolio - The top rated stocks in each market sector
• State's Market Models - Each week we quantify the "state of the market" with a series of models
• The Focus List - Think of the focus list as your own private research department. We do all the work and highlight our top picks each trading day

Our Mission Statement:

At StateoftheMarkets.com, our goal is to provide everything you need to be a more successful investor: The must-read headlines, market commentary, market research, stock analysis, proprietary risk management models, and most importantly – actionable portfolios with live trade alerts.

Finally, we are here to help - so don't hesitate to call with questions, comments, or ideas at 1-877-440-9464.

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment.