After yet another scare out of Europe on Wednesday when Italian bond yields hit a record, U.S. stocks managed to close out the week on Friday with impressive gains. The Dow Jones Industrial Average (chart) closed up 259.89 points, the S&P 500 (chart) +24.16, the Nasdaq (chart) +53.60 and the Russell 2000 (chart) +19.13.

What seems to be working over the past several weeks is whenever there are tape bombs coming out of Europe, and the markets here react negatively, buying opportunities are abound. I cannot remember a time when we have had 300-400 point down days in the Dow Jones Industrial Average (chart), only to rebound within the next day or so and regain all of the daily losses that just occured. Historically, when any major index loses three or four percent in a given day, it usually takes weeks if not months to recover from. Not the case in today’s markets, which makes investing and in particular trading a very arduous task.

We have a about six weeks left in the year and I see no alteration in the trading patterns that have come into the markets since the summer. It is possible that year end window dressing could break us out above the 1300 level on the S&P 500 (chart), however, if any additional shockwaves come out of Europe, we could easily find ourselves back at the 1200 level on the S&P. That said, should we experience any significant pullback, I will be keeping an eye on the energy and tech sectors for potential opportunities.

Have a great weekend 🙂

~George