On Tuesday the Fed is expected to come out and cut rates. Investors are curious as to what the central bank will do and what exactly is to be said about current economic conditions. In my opinion, a quarter point rate cut seems to be the consensus.

Soon the major brokerages will release third quarter results. It’s anyone’s guess as to how bad the damage will be. The credit crunch is bound to continue and hurt the banking industry, but can the market shake it off?

I believe so.

I called for the market rally to continue in 2006 and I’m not backing down. The buying will continue to rise in the midst of short-term fluctuations. In the next few years, there will be plenty of profits to be made on the back of the major indices.

Advertise here.

It’s likely that we will not see a hangover effect from the subprime lending situation until 2010-2011. Until then, market irrationality will continue to rule the day.

Check out a chart of the Dow Jones Industrial Average below. I drew a horizontal line to point out areas where the MACD indicator bottomed out and effectively called the bottom of each progressive rally over the past few years.

The good news for the bulls comes in knowing that this indicator has once again bottomed out, setting the stage for a year-end rally.

Don’t let the day-to-day activity shake your weak hand. Remain steady and take the recent pullback with a grain of salt. It’s just another stepping stone toward building the momentum necessary to push higher.

Good Investing…