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In addition to the US election, the Chinese government is meeting to select its future leaders. The latest data on their economy is quite encouraging. Three main areas saw nice growth in October, including industrial output, retail sales, and investment. It looks as though efforts to turn their economy around are working, and the hard landing others were concerned about early in the year now seems unlikely.

Of course, our sluggish recovery has had little help from China, and resurgence in China (along with other emerging markets) could give the US economy a boost in 2013. Most of the targeted China ETFs have corrected from their highs, while the more broad-based emerging-market ETFs like the Vanguard MSCI Emerging Markets ETF (VWO) have held in a tight range.

US economic data over the past two weeks, especially in the housing sector, has been quite good. Last Friday, consumer sentiment rose to a five-year high, and inventories were also up in September. Household spending also rose. All are positive factors for retailers as we head into the holiday shopping season. This data also suggests that the majority of the consumers are not yet worried about the fiscal cliff.

On Monday, the bond markets and banks are closed in observance of Veterans Day, although the US stock market is open. On Wednesday, we get the latest reports on producer prices and retail sales, along with the release of the latest FOMC minutes.

There is more data on the manufacturing sector coming Thursday with the Empire State Manufacturing Survey and Philadelphia Fed Survey. Also on Thursday, we get the Consumer Price Index, and of course jobless claims. The week ends with the industrial production report on Friday.

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What to Watch
The 2012 asset performance chart shows that GLD has moved above the SPY this week (see circle) as both are now up just over 10% for the year. The daily technical studies now suggest that gold has bottomed.

This may be a significant development, as the chart shows that on July 25, SPY moved ahead of TLT as bonds were topping. Then, on August 15, GLD also moved above TLT, which was just a few days before GLD broke out to the upside.

The stock market has been considerably weaker than I thought it would be two weeks ago, and there are not even any hints yet that the worst of the decline is over. Before that is possible, we need to see a three- to five-day rally and then another drop which is not accompanied by heavy selling.

This is a classic bottom formation, and occurred last May. Back then, the Spyder Trust (SPY) made a low on May 18, then rallied until late May before making further new lows in early June. The charts from early June show that then the A/D line and McClellan oscillator formed bullish divergences at the June lows.

So how long will the market correction last? I would expect it to be over by the end of November, and it may be much better than expected holiday sales data that turned things around. As I cautioned last week, “Don't Jump Off the Fiscal Cliff”—selling in fear of something that may or may not happen is generally not a successful strategy.

However, selling because your pre-determined stop is hit is a totally different matter. Lowering your stops or ignoring them is generally a prescription for disaster.

As for as the major trend, the weekly analysis of the NYSE Composite and its Advance/Decline does not show signs of a major top. The major averages other than the Nasdaq-100 are holding above the 61.8% Fibonacci support from the June lows. If they are decisively broken, then a test of the June lows becomes a possibility.

Unless the outlook weakens substantially further, I would not be surprised to see new rally highs by the S&P 500 in the first quarter of 2013.

In spite of last week’s drop, the individual investor has become more bullish as of November 8. Now 38.5% are bullish, compared to a low of 28.6% in the middle of October. Very little change for the financial newsletter writers, but the survey was conducted before the presidential election was decided.

NEXT: Stocks and Tom's Outlook