The DJIA rose to a 14-month high on Tuesday as investors returned to riskier investments, selling the dollar and sending most natural resource shares higher. Economic data including pending home sales numbers, retail sales figures and vehicle sales reports presented a favorable picture for a sustainable recovery, while fears of contagion from a Dubai default waned. Most symptomatic of the lifted spirits was the 10.6% plummet of the CBOE Vix, a tool used to measure trader sentiment, which had surged 21% on Friday on the Dubai liability concerns. The DJIA increased 1.2% to 10,472, the S&P500 1.2% to 1109, and the NASDAQ 1.5% to 2176.

Tuesday's markets demonstrated across-the-board strength, with all but financial sector shares advancing by more than 1%. At the head of the gains were 1.7% climbs by basic materials, telecommunications and utilities. Banking analyst Richard Bove, who only a day ago sang the praises of the group's balance sheet visibility enforced by regulatory oversight, appears concerned that the government wants to lift capital requirements for a number of banks, with such notable exceptions as Citigroup (NYSE:C), State Street (NYSE:STT), Northern Trust (NASDAQ:NTRS) and First Horizon (NYSE:FHN).

An early bird look at today's markets reveals an extension of Tuesday gains in Asia, with China's Shanghai Composite closing up 1%, following Tuesday strength on reports of manufacturing growth at the highest in five years. Although the dollar held steady this morning, gold continued its meteoric rise, as it hit another record at $1,216.75, trading in unchartered territory above its prior $1,200 ceiling of resistance. Year-to-date the shiny metal has advanced 41%. Crude prices eased to $77.98 ahead of weekly inventory data, expected to remain at prior week levels, tagging yesterday's American Petroleum Institute results.

The S&P appears headed for a flat opening as traders await release of the ADP report on private sector job cuts, the noteworthy harbinger of Friday's nonfarm payroll and unemployment data for November. According to last night's remarks by noted Fed-hawk, Philadelphia Fed President Plosser, Fed funds rates should be permitted to rise as real interest rate gains reflect the growing economy, even as employment levels remain below acceptable levels. The comments strengthened the prospects for a continuation of consumer discomfort from uncertain job security prospects even as economic data appears to support notions of a strengthening economy.

Analysts anticipate good news from this morning's ADP report, estimating the number of lost jobs dropped by a third to 155K last month from 203K in October. Challenger's job cuts this morning showed the fewest in two years, with 50,349 jobs lost, down 72% from a year ago. The reality of a continuing jobless recovery could deflate the enthusiasm over a perceived Dubai containment, capping the move toward added risk until release of the Friday data. However, should investors' attitudes shift toward anticipation of an improving, or even a stabilizing jobs market, the investment picture may shift, weighing on gold prices and boosting the greenback, as expectations rise for an increasingly hawkish Fed.

This afternoon's release of regional overviews from the Fed's Beige Book (2:00 PM ET) will also be important for its representations on economic activity throughout the US. Few expect the report to change significantly from the prior month, which showed stabilization and modest improvements within the economy. Yesterday's drop in the November ISM manufacturing index to 53.6 from October's three-year high of 55.7 was shrugged off as most anticipate the economy's recovery will prove uneven.

Also in play are retail results. Yesterday saw weekly US retail sales improve for the twelfth straight week, according to ICSC-Goldman Sachs. The report lifted numerous retailers' shares, with Sears Holdings (NASDAQ:SHLD) up 2.8%, Dollar General (NASDAQ:DG) up 1.4%, and Costco (NASDAQ:COST) up 1.4%. Returns from Cyber Monday continued the successful run of e-commerce results, with Thanksgiving store sales apparently level with prior year results. However, according to Thomson Reuters, November numbers, filtering out today and tomorrow, may show store sales gains of 2.3%, versus the 7.8% fall last year.

Also key to consumer sentiment is the outlook for housing, which received a positive pending home sales report yesterday. October sales increased for the ninth straight month, unexpectedly rising 3.7% versus estimates for a 1% decline, as first time homebuyers sought to purchase in front of the planned (although extended) expiration of the tax credit at November's end. Lennar (NYSE:LEN) shares jumped 1.7%, DR Horton (NYSE:DHI) 1.7%, and Pulte Homes (NYSE:PHM) 1.9%.

According to our analytics team, amidst all the turmoil now evident in the marketplace, it is likely to prove a good time to be positioned with long stocks to join the rally expected to commence shortly. To examine the list of stocks changing trends in the last week, please click on http://www.mysmartrend.com.

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