The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (

The FRED Report

) -- This week has been quite turbulent, with the events in Italy being somewhat a surprise for the markets, and a surprise for us.  However, the markets are reflecting the basic technical patterns written about in our article here

late October

, where we indicated Italy was the weakest of the European bourses.

We have been bullish on the markets since the bottom in early October, and have been one of the first to look for a yearend rally in stocks

. There are two questions - the first is, "What do the events in Italy mean for stocks around the world, from a technical perspective?" The second is, "What do recent events mean for a yearend rally from a technical perspective?"

To answer the first question, we look at the European ETFs in question. The first one is EWI (iShares MSCI Italy Index Fund), and the second is EWG (iShares MSCI Germany Index Fund). Italy is the "problem of the week", and Germany is the strongest economy in the region, by most accounts. In our

10/28 article

, we mentioned Germany is the strongest market from a chart perspective, in the region, and Italy the weakest, and on the recent decline this has held true. What is interesting is that both have basically held support, at least so far.

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While the US markets declined in sympathy with the Italian situation, they continue to outperform.

We show charts of OEF (iShares® S&P 100 Index Fund), and IWM (iShares® Russell 2000 Index Fund) below, and note that OEF continues to trade better than IWM, a minor concern. We like to see broader indexes lead, but this is not happening at this time. Should this persist, we will become a bit less bullish overall

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The second question is a bit more subjective an answer, but we feel the weight of the evidence remains in favor of

continued rally at least into the end of November.

One reason is that bearish sentiment is high - we show the chart of our sentiment indicator from

last month's Monthly Review

, and note that it is still elevated.

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Other indicators continue favorable as well. So, in the absence of geopolitical surprises,

we would expect continued rally for at least the next several weeks

.

Fred Meissner is founder and publisher of

The Fred Report

. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report.�A detailed bio is here:

Fred Meissner

.