Yes, Virginia, there is a Santa Claus (rally)
Weekend Market Review December 16, 2022
Yes, Virginia, there is a Santa Claus (rally)
The fabled Santa Claus Rally has been getting a great deal of attention this year, with many pronouncing it “failed” or “absent.”
But in reality, it is too early to tell.
The Santa Claus Rally, coined by the late Yale Hirsch, creator of The Stock Trader’s Almanac, and tracked by his son Jeffrey Hirsch, the author of the same title, is defined as the last five days of the year and the first two days of the New Year.
So if you hear or read some anxious person being afraid of getting the stock market equivalent of a lump of coal in their stocking, tell them to relax. There’s still time. A Santa Claus Rally is still possible.
Is it likely? Read The Bull and Bear Case section below to find out.
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For the last four to five weeks, markets have been mostly contained in an up/down, waiting/moving cycle.
This constant back and forth had Bulls hopeful that support was building for a move higher, and Bears possibly nervous with each attempt to break the longstanding downtrend line.
Good news! We finally got a resolution. Kind of.
Why "kind of?"
Because we've now seen movements of similar magnitude on both sides of the range.
(see SPY chart below and revisit the action in "The 1-2 Punch" if you missed it)
It's easy to look at the last four days of selling and assume prices will head lower. And indeed, from a technical view, lower is the higher probability move.
But the ultimate resolution of this range may not be quite that simple.
SPY - has made two attempts higher from this range. Each resulted in a move of 8-10 points. And each was rejected by the downtrend line, year-to-date anchored VWAP, and/or the 200-day moving average.
Now it is on the underside of the range by 8-10 points and a bit extended on a short-term basis.
QQQ - Moved into the gap area (shaded yellow box) but didn’t stay there. Will it fill the gap?
IWM - trades on either side of the November low with today’s spinning top candle showing indecision.
DXY- The daily chart shows the downtrend continuing.
VIX - Wide moves that have settled back into last week’s levels for now.
The Bull and Bear case
The Bull Case from here is a short-term, counter-trend bounce. Why might a bounce be likely?
Fast selling, -7% in 4 trading sessions
Prices are now extended lower from the short-term 8/21 day moving averages
SPY has filled the gap from 11/9-11/10
Quad-witching* out of the way
Long list of Daily DeMark 9 buy setups
Seasonality is still a factor (see comments below)
*The term quadruple witching refers to the simultaneous expiration four times a year of stock options, index futures, and index futures options derivatives contracts. - Investopedia.com
The Bear Case is a persistent, negative technical situation.
Could we sell off further? Of course.
Prices are below all the key moving averages.
QQQ has not filled the gap yet.
Support levels have been broken.
The Dollar DXY shows bounce potential on the weekly chart. Strong dollar = headwind for stocks
News follows price, not the other way around. Something could easily spook the market lower.
What I'm reading and listening to
Some lighter, non-market-related things this week.
Unless you've been living under a rock, you know the Fifa World Cup has been going on in Qatar. Sunday morning, Leo Messi (the 🐐) and Argentina take on the defending champs, Les Bleus - France.
I'll be rooting for Messi to win the Cup and confirm his place as the greatest of all time.
Welcome to Wrexham
This show follows actors Ryan Reynolds and Rob McElhenney as they attempt to turn around one of the oldest Welsh football clubs in existence.
A friend turned me on to this podcast with Jason Bateman, Sean Hayes, & Will Arnett. I'm only partially through my first episode, (guest Ryan Reynolds seemed like a logical place to start) but it's good comedy so far.
Wise words from Market Wizard
note: Tom is active on this platform and regularly shares incredibly valuable wisdom. Also, check out his “recommended” section.
Many thanks, Tom.
Santa Claus is never late. The Santa Claus Rally, if he brings one, doesn’t even start until the day after Christmas.
Seasonality is still tracking historical tendencies
That's it for this week’s edition. Thanks always for reading, subscribing, and sharing with your friends and family.
I hope you have a fantastic weekend. Kick it off with me tomorrow morning for a look at the weekly charts.
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.
It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.
All investments are subject to risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants or other qualified investors prior to making any investment decision.
December 16, 2022 4:15 PM
Long: MRNA1223C210, QQQ, TSLA, TSLA1230C165, USO, XBI0120C85
Options symbols are denoted as follows:
Ticker, Date, Call/Put, Strike Price
Example: VXX1218C30 = VXX 12/18 Call with a $30 strike