Good Riddance to 2008

2008 will be a year that every investor would like to forget, but few ever will. The stock market had its worst year since 1931. But it wasn't just stocks, every asset class got pummeled. No one was saved from the relentless selling and decline in asset values.

And it certainly wasn't just in the U.S. Actually, the U.S. was one of the best performing markets. Many countries saw their markets experience even more dramatic declines. To wit:

• U.K.: -53.5%
• China: -65.2%
• Brazil: -58.2%
• Korea: -61.6%
• Russia: -74.3%
• Iceland: -97.3% (ouch)

You will hear a lot of pundits say they expect 2009 to be better. Duh! How could it not be?? I think not only will it be better, but the stock market will actually finish the year nicely higher than today's levels.

I expect plenty of volatility along the way, but by the end of the year the market will have 2010 in its sights, the stimulus plans will be kicking in, and confidence will likely have returned to the market place in some shape or form.

I was worried that the Santa Claus rally might not show up this year, but it has. From the close on 12/23, the S&P 500 is up +4.2% as of now. Of course, we need the first 2 days of January to stay strong so that we don't erase those meager gains.

Trading comment: One of the things I have been looking for was for the major indexes to break above their 50-day moving averages. The chart below shows that the SPX is accomplishing that today. The small- and mid-cap indexes broke above their respective moving averages yesterday.

This should embolden technicians who montior these bullish developments. Also, in the wildcard category, I would like to think that all of the tax-loss selling, window dressing, balance sheet adjustments, etc. have been accomplished by 12/31. Moreover, all of that cash that big funds are sitting on could begin to creep back in the market in early January.

If this bullish thesis is correct and comes to fruition, I would look for the SPX to work its way toward 1000. At that point, I would probably lock in gains and look to reinstate downside hedges. But that is miles away at this point, so I will continue to take it one day at a time.

long SSO