It was uncertain if shoppers would log on for “Cyber Monday,” but they showed up in force and they opened their wallets to the tune of $733 million. Many analysts were closely watching retail sales from Black Friday and Cyber Monday to see what sort of mood consumers would be in this holiday season.

I’d like to talk about what these numbers, as well as a few others, are pointing to for the end of 2007. I think you’ll be surprised by my conclusions, but hopefully you’ll get a better idea of how the markets will perform through the end of the year—and how you should adjust your strategy.

How Far Do We Follow Shoppers?

Black Friday has been around since 1970s, but it hit the mainstream in a big way in 2002 and since then it has given institutional and private investors alike an important temperature reading on the market and what can be expected for the fourth quarter. Recently, another gauge has been added for investors—it’s called Cyber Monday, and, for those who may not be familiar with it, this day falls on the Monday following Thanksgiving. While shoppers hit brick-and-mortar stores on the Friday after the holiday searching for deals, they go online on Monday to scour websites for further markdowns.

This year, U.S. retail sales increased 2.5% for the week through Saturday, November 24 at stores open more than a year. And online visits to retailer websites on Black Friday increased 10% from a year earlier. Cyber Monday, as I mentioned, brought in $733 million—up 21% from the same day one year ago. This could bode especially well as we approach year-end because the National Retail Federation says that sales in November and December typically represent 20% of retailers’ annual revenue. And according to the International Council of Shopping Centers, the fourth quarter accounts for almost one-third of retailers’ annual profit.

Consumer numbers aren’t the only ones you should be focused on right now when determining what the market may have in store for us through the end of the year. Here are two other factors that I’m looking at right now that make me think that we’re headed for higher Dow, NASDAQ and S&P 500 levels (and even higher China stock prices) come December.

Falling Oil Prices and Rate Rumors Will Help
Year-End Rally

There are two other things that seem to be pointing to a strong last month of the year—oil prices and interest rates.

The price of oil has come down since it made its highs last Wednesday following a U.S. government report that crude stockpiles fell less than expected last week, easing supply concerns in the world’s top oil consumer. This has come as a great relief to investors and while the price dip is likely to be short-lived, it’s giving investors the confidence they need to put some more money to work in the market.

Now for interest rates. We’ve talked before about the psychological impact of policy in China many times. The same rules apply here—even if a policy or a rate change has little impact on the economy, investors’ perception of the impact is enough to move the market. Take the pilot program in China, for example. Earlier this year, the Chinese government decided to allow some of China’s investors to directly purchase Hong Kong H-shares. Investors got excited, the market went up, and then the government revoked the policy, stating that they needed to do further research on its effects.

It didn’t matter that the policy was never rolled out on a full scale—the desired effect of creating excitement in the market had already happened. That is similar to what we’re seeing with interest-rate speculation right now. Though no one knows for sure whether or not the Fed will cut rates again, they’re buying in anticipation and based on a couple of sentences from Chairman Bernanke. This is dangerous territory, especially when the outcome is unclear, but it’s nonetheless giving a boost to our stocks that, coupled with the other factors I’ve told you about, should help us make some healthy gains through the end of the year.

Buy These Two Stocks Before the Bounce

So, how do you invest in a market where shoppers seem willing to spend some money, oil prices are down off their highs and there’s some excitement in the market about interest rates?

The short answer is that you remain cautious with your investments because none of these are sustainable, long-term trends. If you’re comfortable with your current holdings and want to simply ride through the rest of the year, that’s fine, but I would suggest picking up extra shares for the short-term to give yourself a nice holiday bonus.

After the sharp sell-off this month, many of my proprietary indicators are showing that the U.S. market is heavily oversold and ready to bounce. I believe that Monday’s market close was a short-term bottom, and we should get a rally in the next two to four weeks, just in time for Christmas.

One way you can take advantage of the market rally is by picking up shares of the solar cell maker that we own in China Strategy. This alternative energy power play made new highs earlier this month while the rest of the market sold off. In the last 30 days alone, shares are up 20%! And recently, the China-based company reported third-quarter earnings that nearly doubled. I expect this solar manufacturer to continue growing earnings at a rapid pace due to strong demand, rising capacity, increased silicon supplies and recent agreements to further diversify its polysilicon supply sources. Interested in learning more? Click here to join us and get instant access to my detailed buy advice for this leading solar play. If you don’t establish a position in this stock now, you could get left behind as shares climb to new highs during the year-end rally.

Another good year-end bonus stock is the Expedia of China. This online travel services provider bounced almost 8% in yesterday’s market jump, and I’m expecting more gains leading up to the Chinese New Year in early 2008 as China’s citizens rush to book travel arrangements for the holiday. Last month, this company inked a deal with Baidu, China’s largest Internet search engine, to create an online hotel search service. The stock has already handed China Strategy members gains of more than 160%, but I believe there’s more where that came from. Join China Strategy today to get the name of this winner and the rest of the companies in our portfolio. Don’t miss out on all of the profits that the year-end rally will bring!

Robert just posted the December issue of China Strategy to his subscriber-only website. In it, he talks about his recent trip to China and what he learned firsthand about two of the companies in his portfolio. He visited the headquarters of his healthcare play (up more than 140% so far!) as well as the offices of his education company (up over 200%!). Click here to join China Strategy now and be among the first to learn what Robert Hsu discovered about these two doublers. Plus, learn about his exclusive meeting with a China fund manager and how to evaluate a stock’s P/E ratio.