Santa Claus Rally?

Well Santa may be late this year, but I have to say after a slew of bad news this week the market is showing a lot of resilience. Let's review just a handful of ominous items we discovered this week:

1. California is headed to a state of fiscal emergency
2. Greenspan hints at stagflation and is concerned enough to admit we should just hand out cash to strapped homeowners as the least bad of many bad scenarios
3. Darden Restaurants which hits square at middle America (Olive Garden, Red Lobster) reports both food inflation and rising labor costs
4. Coach (COH), which hits square at upper middle income, lower upper income aspirational American consumer continued its implosion
5. FedEx, which is a great tell on the economy warns of rising fuel inflation, and talks about softness in US industrial production
6. One bond insurer gets downgraded by Moody's and another decides its time to fess up about what they really have on their balance sheet
7. Goldman Sachs (GS) reports solid earnings but says November was the toughest month they have faced, Morgan Stanley posts a much larger loss than they anticipated even 4 weeks ago and is forced to go hat in hand to China, Bear Stearns warns of larger loss than they anticipated, and this AM Merrill Lynch will be getting a cash infusion from Singapore.

That's just a sampling off the top of my head. To offset that central banks across the world stand united to inflate the world back to Greenspan era levels with unlimited resources (how's half a trillion suit you?)

With all that said, we are down a measly 0.5% on the S&P 500 this week. In the face of that avalance of bad news. Hence, why it seems Santa Claus looks prepared to enter stage right. I am not sure what else could be thrown at this market and if all this news can't keep a good equity market down, what can? While I believe January earnings reports will showcase many more companies hand wringing over 2008 profit levels, and expect to see guidance slashed by many US focused companies, that is "then", and this is "now". Again, the economy is not necessarily the stock market, so this dichotomy can exist for quite a while. The market seems to be shrugging everything off, so to be an adament bear would leave some good profits on the table.... hence I am an adament chameleon instead and will change with the mood.... just a personal hunch but with a lot of traders off next week, and the market back in the hands of amateurs it's possible we get some nice move up, although some technical resistance lies ahead. Let's see how it goes.