Is the rally in stocks due for a pause with January coming to an end?

NEW YORK (TheStreet) -- Despite the Federal Reserve's move toward maximum accommodation and a quarter from Apple(:AAPL) that sent Wall Street straining for superlatives, the S&P 500 tallied a gain of less than a point last week.

The Dow Jones Industrial Average dipped 0.5%, logging its first down week of the year, raising the question of whether the rally is getting a little long in the tooth just as January winds down. Are the bulls losing some steam or just catching their breath?

Year to date, the major U.S. equity indices are still in great shape. The Dow has tacked on 3.6%, the S&P 500 is up 4.7%, and the Nasdaq Composite has ridden fairly strong results from the tech sector to an 8.1% advance.

Apple's 6%-plus gain last week (allowing it to snatch the title of world's largest company by market cap from Exxon Mobil(:XOM), $417 billion vs. $411 billion) was a big contributor to the Nasdaq's outsized surge.

After a mostly flat year in 2011, when appreciation was generally limited to the large caps and dividend payers, this rally has been greeted with tentative optimism.

Yes, the move has come on low volumes amid middling earnings growth. But the economic data have been getting incrementally better, and the European Central Bank's long-term refinancing operation has brought some stabilization to the situation there, even though much work remains to be done.

Throw in festering hopes that Fed Chairman Ben Bernanke has another dose of quantitative easing up his sleeve sooner rather than later, and there's your bounce.

TrimTabs doesn't like what it sees and is getting cautiously bearish, or 50% short, on U.S. stocks. Its main motivation is a drop in its proprietary demand index, which "uses 21 flow and sentiment regressions," such as fund flow data, to time the U.S. stock market.

The firm said Sunday the index closed at 27.0 on Jan. 26, its lowest reading since September 2009 and down 59.7 points from an interim peak at 86.7 on Dec. 30. Readings of more than 50 are considered bullish.

"The bullish camp has become crowded following the low-volume melt-up of the past month, but few of our key indicators suggest the rally will continue," TrimTabs said. "The most dramatic change recently has come on the demand side ... The only factors providing significant positive support to the TTDI are low levels of cash at equity mutual funds and low levels of assets at retail money market funds."

For its part, Birinyi Associates says the 20%-plus run-up in the S&P 500 off the October lows is actually a positive sign in and of itself. The research firm notes the index has gained 20.63% since Oct. 3, a stretch of 78 trading days. This has happened 15 other times since 1945, Birinyi, says, about once every four years.

The index's track record in the wake of such a move is pretty darn good. The average performance over the next six months is a gain of 6.96%, and the S&P 500 has declined in only two of the previous 15 instances.

Meanwhile, Capital Economics thinks QE3 is still on the menu for the first half of the year, which should only embolden the bulls.

"In the end the Fed didn't take the opportunity to introduce a third round of quantitative easing last week, but the FOMC statement and the Fed Chairman's comments in the subsequent press conference certainly didn't rule out the possibility in the near future," the firm said Friday.

Capital Economics said statements made in the press conference suggest that the FOMC recognizes the threat that persistent unemployment poses in a weak economy.

A further clue about the Fed's intentions could come as soon as the coming week, when Bernanke is scheduled to provide testimony to the House Budget Committee, Capital Economics said.

If he begins making the case for Q3 then, he can continue to build his argument at his next semiannual congressional testimony in mid- to late-February, the firm added.

"We still think that the most likely option is a round of mortgage-backed securities purchases that could run simultaneously with the Fed's 'Operation Twist,' which involves lengthening the average maturity of its overall holdings of Treasury securities," Capital Economics said.

As for Monday, Wendy's International(:WEN) is slated to report its fiscal fourth-quarter results before the opening bell, and the average estimate of analysts polled by Thomson Reuters is for earnings of 4 cents a share in the December-ended quarter on revenue of $613.2 million.

The stock has gained nearly 8% in the past year, but its 52-week high of $5.62 dates back to early July, a few weeks after the company agreed to sell the Arby's chain to a private equity firm in mid-June. Since then, the shares sank as low as $4.29 in early October but have bounced along with the broad market, rising 21% to close Friday at $5.21.

Wall Street is still skeptical about Wendy's turnaround efforts, which have included new burger offerings and the appointment of new CEO Emil Brolick in September.

Of the 20 analysts covering the company, 14 are at either hold (13) or sell (1), although the median 12-month price target of $5.75 suggests confidence in some upside from current levels.

The shares still look expensive though, trading at a forward price-to-earnings ratio of 23.7, vs. 15.6 for McDonald's(:MCD), whose stock was the top performer in the Dow in 2012, rising nearly 34% in the past year.

UBS was one of Wendy's few bulls until Friday, when it downgraded the stock to neutral from buy and dropped its price target to $5.50 from $6.30. The firm also cut its earnings estimate for fiscal 2012 to 23 cents a share from 30 cents a share, citing slowing sales momentum from the rollout of the company's W burger and higher beef costs. UBS thinks Wendy's may have introduced its next new burger offering a bit too soon.

"We believe that Wendy's Dave's Hot n Juicy burgers had the advertising to drive trial and the quality to warrant repeat purchase," the firm said. "However, we wonder if the introduction of the W so soon after the Hot n Juicy seems to have created confusion and trade down. While we had hoped that the W might cause trade up from the $0.99 menu, it appears to be cannibalizing premium burgers."

Still, UBS is bullish on Brolick taking over as CEO, saying his leadership bodes well for the long term.

"We believe that new CEO Emil Brolick will ultimately steer Wendy's to success, and we look forward to hearing about his vision and plans at the analyst day on Monday," the firm said. "We expect to hear about premium innovation and reimaging testing."

Check out TheStreet's quote page for Wendy's International for year-to-date share performance, analyst ratings, earnings estimates and much more.

Early reports are also due from Banco Santander(:STD), Canon(:CAJ), Gannett(:GCI), Ryanair Holdings(:RYAAY), Thomas & Betts(:TNB), and Wolverine World Wide(:WWW).

The late roster features Actuate(:BIRT),, Integrated Device Technology(:IDTI), McKesson(:MCK), and Rent-A-Center(:RCII).

Monday's economic calendar is pretty light with just personal income and spending for December at 8:30 a.m. ET. The consensus is for a 0.4% increase in personal income and a 0.1% rise in personal spending, according to Credit Suisse is in line with the consensus on income but thinks spending could be a bit soft.

"We expect nominal consumer spending to be flat, with an expected rise in service spending offset by declines in control group retail sales, auto sales, and gas prices," the firm said. "Inflation should be flat on the month, so real spending should also be unchanged."

Capital Economics is line with the consensus on both income and spending but notes that a spending bump of just 0.1% is nothing to get too excited about.

"Although real consumption rose at a half-decent annualized rate in the fourth quarter of 2.0%, spending growth appears to have lost a fair amount of momentum right at the end of the year," the firm said. "This does not bode well for the first quarter of this year."

And lastly, M&A will be featured prominently in Monday's corporate headlines following a report from The Wall Street Journal on Friday that Delta Airlines(:DAL) is mulling a bid for US Airways(:LCC) or possibly even AMR Corp., the parent company of American Airlines.

PharMerica(:PMC) and OmniCare(:OCR) will also be active after the Federal Trade Commission moved to block OmniCare's hostile bid for PharMerica, saying it would be bad for consumers.

-- Written by Michael Baron in New York.

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