In this case, the rumor is, usually, a positive announcement of agreement in principle, followed by the news that not everyone in Europe can agree or live with the terms. Thus the agreement between Sarkozy and Merkel took the market up nicely, but now comes the news and the reality check again on Europe. Will the "smerk" once again hit the market and take it down to test support?
There is no way to predict the market because there are too many unpredictable factors. But prepare for any eventuality and check the most probable outcome. Most likely look for a pullback to test support next week. Then continued optimism until after the New Year with the Santa Claus rally once again testing resistance and it could break above.
The end of January is unpredictable because of Europe. At this point 2012 is not callable. But expect the Europe fix, because the alternative to ECM life (namely death) is unacceptable. With Europe fixed one way or the other, 2012 will muddle along with the unemployment and housing still a drag on the US economy, not to mention the recession in Europe.
