Market Direction

On CNBC's Asia Squawk Box (video and article) this morning, Marc Faber repeated much of the same investment themes he's been favorable on for the past few months: inflation, tech companies with the capital to continue R&D through the downturn, Asia, and a possible continued rally in the short-term for the broader market.

A new idea was that the Japanese yen (FXY) could fall versus the dollar, and was a possible short candidate. I'm going to look at this more closely, but it's in keeping with the theme of a market rally, fueled by a reduction in fear. Faber highlighted this theme as well, discussing the performance of iShares iBoxx $ Invest Grade Corp Bond (LQD), a fund that holds quality corporate bonds. That fund fell from $105 in mid-May (about $102 adjusted for dividends) down to $81 ($80 adj.) on October 10. LQD was back over $100 in early January, and has slipped back to $97 as long-term bond yields rise.

Todd Harrison of Minyanville also expects a rally.

Admittedly, part of Harrison's prediction is based on a "gut feeling." But he's
also expecting the next phase of the bank bailout package to be announced soon,
which could provide a catalyst.

One of the first markets to tank in 2007 and early 2008, mainland China, is up 19.8 percent for the year through Friday, February 6. Could a similar rally be in the cards for the U.S.?

If it is led by financials, I'd also expect tech to do well, as it's already outperformed in 2008. Commodity producers also may lead, since a rally may be thought to be backed by the stimulus spending.