Stocks continued higher for the second week in a row and the rebound has gone far enough to get the attention of many investors and traders. MoneyShow’s Tom Aspray offers a review of the major indexes and offers tips on your next moves.

The recent rally has confirmed the longer-term analysis from November 15 that concluded that the stock market had not completed a major top. The rally lost some steam on Friday, but a more convincing lower close is needed to signal that a correction is underway.

There were some signs last week that the stock market was starting to ignore the periodic negative intra-day comments on the negotiations over the fiscal cliff. This does not mean that one should get complacent as the market is likely to receive more shocks in the coming weeks from both the fiscal cliff and the always festering Euro debt crisis.

Being complacent or panicking when it comes to your investments is almost always a bad idea. I felt several weeks ago that the panic-like selling over concerns about the fiscal cliff were overdone. But now that it appears that the worst of the selling is over, what is an investor to do?

Most investments turn out poorly because the entry price was too high. Therefore I was a bit surprised when a guest Bloomberg expert Thursday afternoon advised buying the S&P 500 or the Spyder Trust (SPY), which was then trading around $142.

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In the top left-hand corner of the chart above is the Spyder Trust (SPY) updated through the close on 11/29 that was not far below the strong chart resistance in the $142.50 area. Buying at this level would mean using a stop under the November low of $134.70, which has an uncomfortably high risk. That in my opinion is not being a smart buyer.

Just after the election I poised the question Should You Invest Overseas? This was because these markets were holding up better than US stocks and appeared to offer a better risk/reward opportunity.

Just under the chart of SPY is the Guggenheim China Small Cap ETF (HAO), which had good support from late October in the $21-$21.50 area and a strong uptrend, line b, from the September lows. Buying at this support with a stop under the late October lows seem to be a well controlled opportunity.

This ETF and iShares MSCI China Index Fund (MCHI) I both liked on November 13 because as I could target a buying level near support and a stop at a reasonable level. Two Eurozone ETFs also had compelling chart patterns.

On the top right is the chart  is the iShares MSCI Italy Index (EWI), which a few weeks ago appeared to be forming a flag formation, lines c and d. There was well defined support in the $11.39-$11.72 area. A close above $13.25 would complete the continuation pattern with the measured target from the flag formation at $14.65.

The chart of iShares MSCI France Index (EWQ) on the bottom right looks very similar though its flag formation was completed last Thursday. A retest of the breakout level on light volume should be a buying opportunity.

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Tickers Mentioned: Tickers: SPY, HAO, MCHI, EWI, EWQ