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More Money To Pump The Market

|Includes: SPDR S&P 500 Trust ETF (SPY)

The market is entering the 2017 year on a positive note. The end of the year rally made 2016 positive. The NYSE Composite rose 8.28%, the DJI ended the year with 11.85% gain, the S&P 500 gained 8.73%, the Nasdaq 100 won 5.56% and the Russell 2000 advanced 16.33%.(source: http://www.marketvolume.com/quotes/marketperformance.asp). The most of the 2016 gain came to the end-of-year rally in November-December of 2016:

  • The S&P 500 gained 3.31% in November and 1.79% in December - in summary more than a half of its yearly gain.
  • The DJI gained 5.15% in November and 3.23% in December - in summary more than a half of its yearly gain.
  • Most of the Nasdaq 100 gain comes to Summer of 2016 - this index did not have end of the year rally.
  • The NYSE Composite gained 3.30% in November and 1.98% in December - in summary more than a half of its yearly gain.
  • The Russell 2000 gained 9.91% in November and 2.97% in December - in summary more than a half of its yearly gain.

As you see, the biggest rally was in November of 2016 and the biggest winners were small cap stocks listed in the Russell 2000 index. December was not as positive, yet, the market is still going into 2017 on a Bullish note.

Chart courtesy of http://www.marketvolume.com/charts/

We have clearly defined bullish trend, we have low volatility, we have positive money flow and we have strong long-term bullish Breadth numbers. So far, everything looks good for the long-term Bulls.

We may see some weakness, which may spread over the first days of January, however, the odds are slim this weakness may harm current long-term Bullish sentiment.

Investors are eager for coming changes. Many may think it is about tax cuts. However, before something is implemented, we will have commission researching how it will affect the economy, discussion in congress, discussions in the Senate, corrections and etc. If it is going to come it is not going to be earlier than at the end of 2017. Plus we do not know what exactly will be there.

The reality is that the regulations is one of the main reasons making the stock market investors bullish. During the Mr. Obama's administration, in order to avoid "too big to fail", in order to prevent the economy from stock market bubbles and crashes, there were many regulations implemented to press the financial institution to have reserves of cash, and there were many regulation limiting the banks in their investments activity.

There is a lot of cash out there. If some of the regulation limiting the banks' investment activity are lifted, it may free a lot of cash. If it occurs, as always, this cash will not be injected in the economy, it will be pumped in the stock market - it may push the market into another spin of Bullish trading.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.