Has the Santa stock market rally already started?
A look back over the chart for the S&P shows that the stock market often rallies in the week leading up to Christmas and this rally can carry over into the before the New Year. The Santa rally as it is called, looks like it may have already started this year. The beginning of December saw markets suffer a well overdue correction. Once the E-mini S&P broke the previous all-time high set in September at 2022.50, new all-time highs were set in what seemed like an almost daily occurrence. In fact we set new all-time highs in four weeks out of five before topping at the new all-time high of 2079 on 5 December.
As you can see in the daily chart above, the stock markets hit well overdue profit-taking and dropped very sharply to a low of 1968.25. This drop of 110 points was seen over the course of just seven trading sessions. It retraced a little over 38.2% of the rally from the October low in the March contract of 1813. Although it closed below this important Fibonacci support level of 1977 on Tuesday, it quickly recovered on Wednesday, in a very positive signal. It’s been an extremely volatile period and Wednesday’s rally took prices straight back up to the highs of this week. Clearly there were buyers ready to jump in at important support levels to ensure the longer-term Bull trend continues into the end of the year. As I write we are hovering just below the highs of the week at 2017/2019, but if we can see prices start to move above 2024, this should signal the likelihood of further gains to keep the hopes of a Santa rally alive.
The chart for the E-mini Dow Jones below shows a similar correction of course and initially closed below important Fibonacci support at 17,080 on Tuesday night. However, the 100 day moving average (Blue line) did an excellent job of supporting prices, as we approach the highs of the week.
All we need now is a break above important resistance at 17400 to keep the Santa rally hopes alive till the end of the month.
It is a similar picture for E-mini Nasdaq which just managed to hold on to important Fibonacci support at 4090 & bottomed quite a way above the 100 day moving average for the March contract at 4065.
A push above important resistance at 4185/4190 is now required to help ensure bulls enjoy a happy Christmas.
I will end with a look at the Dax Future which actually found a floor a day earlier than the US stock markets & bottomed out on Tuesday quite spectacularly. The Dax retraced a greater percentage of the rally from October lows, falling 50% to hit the 9235 Fibonacci support & over running just a little to 9216.50. Buyers were waiting to pile in to the market there & drove prices over 350 points higher by the close. Again, the recovery wiped out almost all of this week’s losses. The Dax December future now requires a sustained break above resistance at 9700 to turn the outlook more positive again in to the end of the month.