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This week, the Dow continued its downward path right up till Friday, when it finally rebounded, gaining almost 500 points (1.18%) to end the week. But as of yesterday, the Dow added 11 fat black candles to its chart, moving down almost 2600 points (6%) in the process. That long losing streak indicates there is a significant amount of indecision in the market as we head into the final week of 2024.
Santa Claus usually brings Wall St. the gift of a short rally during the last five trading days of the year and the first two trading days of the new year. It’s a small gain —1.3% on average — but one that’s appreciated and cherished by investors. If, for any reason, Santa fails to shower Wall St. with its gift, it often precedes a bear rally. So be sure to leave out the cookies and milk for Santa.
Often after a massive selloff like the one we had on Wednesday, investors question how they could have anticipated this type of price action. Market breadth indicators are super handy. StockCharts has an extensive collection of these indicators and one that’s useful is the McClellan Summation Index. I prefer to apply this indicator to a weekly chart of the S&P 500 to get a big-picture view of whether the bulls or bears are in control. This weekly chart shows that the McClellan Summation Index was declining even though the index was climbing. This divergence would have been a signal that the bearish pressure would soon dominate. You can switch to a daily chart to see if Santa’s going to make it to Wall St.
The end of the year is a good time to start thinking about how to position your portfolio in the new year. Don’t miss the StockCharts TV video in which legendary Larry Williams shares his outlook for 2025. Larry discusses the problems that lie ahead, the opportunities, and his forecast for a few stocks (you’ll find the link in the video section of the newsletter). If you’re interested in Larry’s 2025 forecast, here’s the link.
The +1: Our holiday special is still going on but it will end soon. Don’t miss out on this great deal.
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