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Why the rally in stocks is just beginning: Portfolio manager

Talking Numbers

The S&P 500 index has just completed its seventh winning week in a row. Will we see more gains ahead?

While this will be a short week, some economic numbers being released over the next three days may go a long way to move what's expected to be a thin-volume market.

Housing will be the big focus of the week's data. Monday morning will see the release of pending home sales for the month of October. Tuesday's data include housing starts, building permits, the FHFA's Housing Price Index, and the Case-Shiller 20-City Index. And, on Wednesday, the MBA Mortgage Index will tell us the strength of mortgage applications from the previous week.

(Watch: Underwater insurance, as millions of homeowners emerge for air)

Of course, that's not all that's being released. Consumer confidence, durable goods orders, the University of Michigan's Consumer Sentiment Index, and the Chicago PMI will tell us a little more about where everyone thinks the economy is headed.

Meanwhile, the benchmark S&P 500 index has just completed its seventh winning week in a row, up about 6% since the middle of October.

"The next five weeks should be awesome," predicts John Stephenson, portfolio manager at First Asset Investment Management. "Volumes will be light, but I think what will happen is the data are once again going to confirm that the economy's fairly weak but markets will be strong. The Fed will come out again and be reassuring and dovish."

"You're going to see increased multiple expansion in the S&P going forward," says Stephenson, referring to the index's price-to-earnings ratio. And, while the S&P's prices will go up, Stephenson also sees the index's earning prices going up as well.

(Read: Stocks rise; S&P 500 sets record finish above 1,800)

"You're going to see continuing earnings growth," he says, noting it will attract investors to the market. "All that money that's sitting on the sides [is] going to be reinvested into capital expenditures. It's going to drive organic growth through next year."

Steven Pytlar, Chief Equity Strategist at Prime Executions, says the chart of the S&P 500 backs up Stephenson's claim that new money is coming into the markets. According to Pytlar's charts, the index broke through a key upward trend line after the end of the federal government's budget battle in October, indicating investors were jumping in. Pytlar sees the subsequent price movements as having bullish implications.

To see why Stephenson's fundamental and Pytlar's technical analyses conclude a bullish run for markets, watch the video above.

More from Talking Numbers:

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