Is Santa Claus Coming To Wall Street This Year?

The indices extended the rally from the mid October lows last week, but only because Wednesday saw a huge rally that had the SPX jumping 123 and the NDX exploding more than 550! The rest of the week, both before and after, saw the indices fail to advance. Technicals were positive even on the down days for the most part, a positive divergence.

The rally last week saw the indices rally to their intermediate declining tops line resistance levels going back to their all-time highs established late last year. Going forward they will have to break through those and extend further or risk a deeper retracement. 

For the week, group leadership strength was centered in communications services and consumer discretionary sectors, but late in the week, the Chinese stock group exploded sharply and was dominant. Solar stocks also did well late in the week.

We’re headed into a normally stronger time of year in December and a “Santa Claus” year-end rally extension wouldn’t be a surprise, but since we’ve already been in rally mode since mid-October, this year might be different. Next week’s early action might give us clues as to the direction of the markets. Stay tuned!

Harry Boxer, President & Founder​​

TheTechTrader.com

Will Next Week Show Us Where the Market is Headed?

Once again, last week was an important one technically in the markets as KEY, overhead, declining tops lines and lateral price-level resistance were tested or got close to being tested. The shortened Thanksgiving holiday week saw the SPX, Transportation, and Russel 2000 indices all press near their declining channel-tops resistance going back to the November-December 2001 highs.

Friday’s shortened session showed some resilience despite a nearly $3 loss in heavily weighted AAPL, as the rest of the market leaders seemed to mark time.  That’s a positive technical occurrence.

Retailers, housing, solar and select biotech groups were seen as market leaders last week. The technicals were bullish in terms of advance/declines and up/down volume, as they generally confirmed the rally we’ve seen since the October lows.

We are now nearing a normally bullish time frame for a possible extension of the recent run via a “Year End” or “Santa Claus” rally.   However, since the S&P 500 has already run over 500 points since the mid October lows, we just may have experienced that effect earlier this year.

The McClellan Oscillator is somewhat extended but certainly not extremely overbought at +71, and the VIX volatility indicator at 20.50 is also not yet near the extreme readings we’ve seen in past markets. This would indicate a possible extension to the current rally phase before a more important pullback retest takes place.

Next week could be one of the more important weeks this year as it may determine the market’s direction for the next few weeks. Stay tuned into TheTechTrader.com for more details in the weeks ahead and remember “Trade what you see NOT what you think”. TheTechTrader.com

Harry Boxer, President & Founder​​

TheTechTrader.com

Are We Headed for a “Santa Claus” Rally?

The indices put on a show last week finishing with one of the best weekly gains in years with the S&P 500 surging over 220 as the NDX ran nearly 1000 points! Technicals were strong as the up/down volume and advance/decline ratios confirmed the price movements. However, when the week ended the indices were perched at resistance and appear vulnerable to at least a possible pullback /retest or consolidation. in addition, the indices had completed a 3 wave advance and are due for a 4th wave pullback retest as well.

So the next several sessions may see a more difficult trading environment in what’s looking more and more like a year end rally in the making. Right now 4000-4008 on the S&P 500 appears to be short term formidable resistance as is 11850-60 on the Nasdaq 100 or NDX.

When the next wave is completed my price level forecast projections lie near SPX 4115-25 and at the NDX 12400-450 zone, with support near SPX 3860 & 3780 A deeper retracement could see a test of 3640 and possibly 3568 On the NDX Support appears to be near 11235 & 10800.

Current action also shows hundreds of stocks breaking through declining channel tops resistance with moving averages crossing over bullishly upward. These certainly are strong indicators of upside trend reversals, as well.

In summary the week ahead may be a key to the direction for the rest of this year and whether of not we will experience a “Santa Claus” rally.

Last week’s trading week started with a failure to take out the 3900 resistance level on the S&P 500, and the 11575 resistance level on the Nasdaq 100. By Tuesday, they were rolling over and during the next 4 sessions the indices slipped about 200 points on the S&P 500 and nearly 1000 on the Nasdaq 100. Friday saw a reversal with the indices gaining about 1.4%.

The Friday afternoon rally back was signaled by a strong positive divergence in intraday technicals on advance/declines and up/down volume numbers. Key technical resistance now exits at 3800 and 3900 SPX, and 11,200, 11,400 and 11,700 NDX.

The sharp mid-week pullback was about a 50% Fibonacci retracement for the S&P 500, but the NDX was much steeper, giving back nearly 80% of the prior 1250 point multi-session rally. The markets have an opportunity this week to hold support after this current test and stage a strong C-wave rally back. Early in week we will have to see if the bulls can take control. The jury is still out on that. 

Late last week, Chinese stocks and U.S. stocks, with high exposure to the Chinese market, surged and maintained sizable gains on Friday even as the indices traded down. Aside from the renewed speculation about easing the zero-Covid policy, Chinese stocks were also boosted by reports that U.S. auditors completed their on-site inspection of Chinese-listed companies sooner than expected. 

There were also some big technical moves in the commodities market late in the week. Related stocks and ETFs surged and maintained big moves, even during Friday’s mid-day sharp pullback. WTI crude oil futures settled the day up 5.2% to $92.64/bbl, while copper futures jumped 7.6% to $3.69/lb. Natural Gas rose (6.56%) to $6.72/MMBtu

Gold and silver related stocks and ETF’s also had a strong finish to the week. Perhaps a significant technical move may be beginning in that sector. 

We’ll be monitoring these groups for possible recommendations going forward.

“Trade what you see, not what you think.”

After the last 2 + weeks of markets rallying back from an extreme oversold condition, it was certainly no surprise the indices experienced a slight pullback/retracement on Monday. The intraday patterns that developed saw pullback levels hold near minor support at the SPX 3860-63 and NDX 11,345 levels, but the indices did finish in the red to start the week. 

The current technical state of the indices shows key next resistance overhead near SPX 3900 & NDX 11680, A price volume surge through those levels would indicate the markets intention to at least test higher levels short term, but the bigger picture tells a more bullish posture . A basic Wave analysis shows a possible completed 5 waves down to a typical selling climax. Although we’ve seen even deeper more oversold readings in the past the price patterns and technicals that formed signaled that a considerable buying opportunity likely existed at the lows on October 13th.

One of the most striking technical observations are the hundreds of stocks I track that appear to have formed distinct bottoming patterns over a period of weeks and months and have now started new up trends with a price volume thrust and are beginning to extend their moves higher.

Joe Granville once stated “The market climbs a wall of worry” and it certainly appears to be attempting to do that currently. We’ll be closely observing our indicators and technical patterns to get confirmation that the current action might be the “real deal” or just a strong snapback/ retracement in an ongoing bear market  Stay tuned 

“Trade what you see, not what you think.”

Harry Boxer, President & Founder

www.thetechtrader.com