Market Preview: Banks A Lot

NEW YORK (TheStreet) -- However the December jobs report turns out, the major U.S. stock indices are off to a promising start in 2012, and at least one observer thinks the charts bode well for a near-term bull run.

"Both the DJIA and the S&P 500 have broken out from inverse head-and-shoulders (H&S) formations, suggesting to us that we are about to embark on another leg higher," said Mark Arbeter, chief technical strategist at S&P Capital IQ, in commentary on Thursday. "We continue to view equities in a positive vein, and believe that the risk is to the upside."

Arbeter said the pattern points to "a measured move to the 1,350 to 1,370 region in the first quarter" for the S&P 500, which settled Thursday at 1281. Support is in the 1260-1265 area. He noted that 1370 represents the market's 2011 top in early May, and said the index would likely run into some resistance at around 1313.

A strong earnings season wouldn't hurt the cause and Wall Street will be getting some meaningful reports soon enough with Alcoa(AA) up on Jan. 9, and JPMorgan Chase(JPM) kicking things off for the big banks on Jan. 13.

If the broad market is indeed going to make a meaningful push to the upside, the bulls would like to see the financials start to pull their weight. Thursday's rally was a start but that was predicated on the prospect of more government aid, not improving fundamentals. At the same time, there is some sentiment out there that 2012 could be kinder to the banks than 2011 was.

BMO Capital Markets may have headlined its 2012 outlook piece, "It's Deja Vu Once More," which doesn't seem very optimistic on the surface, but the firm seems to be erring on the side of caution.

Most of the commentary is positive. BMO says it's "actually raising some of our 2012 EPS estimates for the first time, after consistently cutting them for most of 2011" and it bumped up its view of total loan growth for the regional banks next year to 6% from 3% while forecasting diminished margin pressure.