What happens after the Santa rally ends?

December 25, 20231 Comment

Merry Christmas! Quick Christmas blog as we watch the Santa rally–which officially ends on the second trading day of January. Where will markets go after the fun?

Here’s a chart of the SPX. Its just on the verge of testing the early 2022 highs of 4800. This is a vital resistance point. It must crack 4800 and stay above that level for a few weeks. If it fails, we have the potential of a macro sideways market – per many of my comments in the past.

Food for thought:

-The market is pricing in a dovish Fed for 2024. Apparently, 166bps of rate cuts are priced in by the markets according to BearTraps. Will it get its wish? What if it doesn’t? Just thinking out loud here…

-The broader NYSE index is still well under its old highs of 17,440. Breadth is improving, but not bullish. Also note my breadth observations in the last Bear-o-meter report here.

 

The S&P TSX 300 is breaking the 20,800 major resistance point I talked about in my last blog. Its still well below its 2022 high of 22,000. Given the strength in materials (and energy to some extent) lately, along with a move on the banks, perhaps we will see 22,000 tested soon. Its what happens after that – there’s the mystery!

 

Conclusion

After the Santa rally ends in early January, the market enters a seasonal period of chop before it resumes its traditional seasonal rally into the spring. It will be interesting to see if there is a period of giveback in the coming month or so. Further, as you probably know if you are a regular reader, I do wonder if we will see failures at or near the 2022 market highs, followed by a retreat. Per the 100 year Dow chart I have shown many times on this blog, markets can go sideways for a decade or longer with only minimal breakouts. Here’s the chart for a refresher:

 

Final thought

Merry Christmas and Happy Hanukkah to my readers!

Next week I will be publishing my rant-blog. If you are a subscriber, you will get a heads up in your inbox that the blog will be posted. The rant will NOT be sent to your inbox, as it is off topic. It will be your choice, after the heads up, to read it by going to the website.

Also–my newly updated book Sideways is now for sale. When this book was originally published in 2011, it became a best seller. Tradition seems to continue – It made the number one selling commodity finance book on Amazon recently! Here’s the link.

Sideways book cover

One Comment

  • What happens is hedged funds will short in 10’s of billions vulnerable companies.

    Those that in the past that had been unaffected up until now from ravages of the short selling, now complain…the Magnificent 7, Elon Musk, etc. Trying to garner sympathy and an empathetic ear from Mr Musk is flabbergasting considering the destruction of Twitter, etc.

    The question becomes: will our investments be ravaged by short sellers and hedge funds in 2024?

    Reply

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