Is the Santa Claus Rally Over?
Michele Schneider | Dec 20, 2022 12:37AM ET
Bond prices plummeted, yields increased, and US indexes fell again Monday. The major U.S. indices have fallen for the past two weeks, and on Monday, most markets closed near their lows.
The S&P 500, represented by the SPY above, closed significantly below its 50-day moving average today. The Real Motion Indicator above indicates that the SPY's price is not oversold.
December usually is bullish during a mid-term election year, and seasonality favors higher stock prices, but not this month.
While conflicting signals exist, most of MarketGauge's trading indicators have pointed to risk-off during December.
The CPI print and subsequent December Fed hike are in the rearview mirror, but the relentless market selling prompts the question of whether any Santa Claus rally will occur before 2023.
Sellers were clearly in control on Monday for the fourth consecutive trading day, so any further price deterioration this week should be respected.
The Real Motion Indicator above shows measured downward momentum in line with the S&P 500’s price decline.
This should provide traders and investors one more reason to be vigilant and not surprised if the market moves lower but also open to a Santa rally if key overhead price levels are swiftly regained.
Except for the Diamonds (DIA), all major US indices (SPY, QQQ, IWM) are below their 50-day moving averages. In line with the Real Motion Indicator above, US indices are not oversold.
S&P 500 resistance levels to confirm more upside is 3850, 3910, 3930, 3950, and 4,000, and pivotal support levels now are 3800, 3750, and 3500. 3750 is a crucial support area.
Stay alert in this ordinarily quiet holiday trading week and watch price action closely. Know your risk, have tight stops, and take profits when prudent.
h2 ETF Summary/h2S&P 500 (SPY): 375 support and 390 resistance
Russell 2000 (IWM): 170 pivotal support and 176 resistance
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Dow (DIA): 324 first level of support and 334 first level of resistance. The only index above its 50-WMA.
Nasdaq (QQQ): 265 pivotal support and 276 resistance
Regional banks (Regional Banking ETF (NYSE:KRE)): Pivotal support is 53 and resistance 59.
Semiconductors (VanEck Semiconductor ETF (NASDAQ:SMH)): Support is 204 and 213 resistance.
Transportation (iShares Transportation Average ETF (NYSE:IYT)): 211 pivotal support, and 222 is now resistance.
Biotechnology (iShares Biotechnology ETF (NASDAQ:IBB)): 130 was pivotal support and 139 resistance. Closed at 130.56, next level of support 127.
Retail (S&P Retail ETF (NYSE:XRT)): Closed slightly below 60. 57 pivotal support, and 63 is now resistance.
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