The ducks may be falling into line for a year-end rally

Market observations for the week of Nov. 1 to Nov. 5, 2010

Claymore Investments, Inc. 10 November, 2010 | 12:50AM

The major market indices finished the week broadly higher as the heavily anticipated data trifecta -- midterm elections, Federal Open Market Committee (FOMC) meeting and employment report -- contained no surprises and all three outcomes were perceived as investor friendly. Last week's strength left the major indices at or just off their highest levels in over 12 months.

The perfect storm of good news appeared to be a catalyst to get hesitant investors off the sidelines as a major veil of uncertainty was removed. With that said, the U.S. market, as measured by the S&P 500, has advanced by over 16% since the end of August and may need a pause to refresh.

The melt-up over the past several weeks has left the markets in an overbought position, from a technical point of view. This, coupled with the rising level of bullish sentiment and the high levels of investor complacency (as signal by the recent drop in the VIX Index), may be setting the stage for a near-term period of consolidation.

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Claymore Investments, Inc.

Claymore Investments, Inc.  

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