Is Santa Coming to Fix the Rally? What is the Weekly Volume Anticipating?
The bearish signals posted last weekend were accurate and proven true.
The "Santa Claus Rally" is a term used to describe a historical tendency for the stock market to experience a rise in prices during the last five trading days of December and the first two trading days of the new year.
It was first identified by Yale Hirsch in his Stock Trader's Almanac in 1972. Since then, market analysts have observed this phenomenon occurring with some regularity.
While there's no single definitive explanation for why the Santa Claus Rally happens, several theories attempt to explain it:
Holiday Optimism: The general positive sentiment and festive atmosphere surrounding the holidays may contribute to increased investor confidence and a willingness to invest.
Holiday Spending: Increased consumer spending during the holiday season can boost retail and consumer discretionary stocks, potentially driving the overall market higher.
"Window Dressing": Fund managers may engage in "window dressing" at the end of the year, selling underperforming stocks and buying high-performing ones to improve the appearance of their portfolios for year-end reports.
Low Trading Volume: Trading volume tends to be lower during the holiday period, which can sometimes exaggerate price movements.
Tax Considerations: Some investors may engage in tax-loss selling earlier in the year and then reinvest in the market in late December.
It's important to note that the Santa Claus Rally is not a guaranteed event. While it has occurred frequently in the past, there have also been years where it did not materialize. It's an observed tendency, not a reliable predictor of future market performance.
Last week, several bearish signals were described in this publication:
The Volatility Index (VIX) was signaling a significant reversal incoming.
The DXY also was suggesting bullish further move to the upside.
SPX had found rejection at $6,109
Breadth indicators were diverging showing progressive deterioration while the indexes were setting new highs.
Those signals were confirmed after triggering specific levels that were also posted as a tool of risk management, that means that the readers of this publication had references to close long positions before the SPX completed its -3% move on Wednesday. This publication has anticipated the bearish mode of IWM since a month ago already; Small Caps have fallen since the bearish warning.
Dow Jones also continued its decline as expected, SMH unfolded a bearish move as probabilities favored, TSLA, Bitcoin, META, and MSFT declined as their setups also anticipated.
This edition analyzes the setups with the key levels that provide confirmations for them, so for bearish ones there are triggers that maximize probabilities for continuation and the readers have an early warning that they can use on their favor. Same for the bullish breakouts, as they were anticipated for Bitcoin, Tesla, GLD, APPL, and GOOG in September / October publications before the big move came for each one.
These are the publications from this week so you can catch up with the Elliot Wave Content which so far has been one of the most read publications.
On Mondays I write an edition for free subscribers, let me know you will be around this Monday liking this email at the heart below the subject and restacking (reposting) this one if you use the app. I’m considering a pause focusing on the premium editions during the end of the year, unless I see 50+ signals of interest.
This edition analyzes the technical context for SPX, NDX, DJI, IWM, SMH, TLT, AAPL, GOOG, TSLA, NVDA, MSFT, AMZN, META, PLTR, GLD, SLV, Nat Gas, Bitcoin and other contextual charts that have proven their worth to time the market.
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SPX