Ignore the Headline Data: The Stock Market Could be Gearing Up for a Major Rally

The stock market swirled lower over the past week as a barge full of U.S. economic data sank in stormy seas. But don't worry: We may actually be able to ride some of these swells to sizeable profits. Indeed, weak soundings on the economy have hit stocks as a matter of routine over the past two years, and each time, after some rest, the bulls have charged on. This time could be different, but the odds are that low interest rates, a strong credit market and the accommodative monetary policy eventually will conjure animal spirits and rejuvenate prices. The Standard & Poor's 500 Index , Dow Jones Industrial Average and the Nasdaq Composite all fell by 2.3% last week, while the Russell 2000 fell 3.4%. Overseas developed markets were flat, and emerging markets rose by 0.2%. Gold and crude oil also were flat, silver fell 4.6% and bonds sank by 0.05%. The biggest gainer in the past week was angst, as the CBOE Volatility Index ($VIX) rose 12.3%. A lot of technical damage has been done to stocks, and some of the biggest stocks that the bull camp loves to own have been battered. But there is a big difference between being hit hard and being knocked out. Click here to read on...