The feature article is a relatively short one, discussing the various January seasonal patterns that exist. Most of the article deals with the end-of-the-month “January Seasonal Buy” that we have used in our recommendations for a number of years. There is a specific recommendation for this system on page 2.
The period between late October and the end of January is replete with seasonal trades. In late October, we had the “October seasonal” buy, followed by the Thanksgiving-related seasonals (most notably the post-Thanksgiving trade), which dovetails at the end with the Santa Claus Rally.
The market continues to be volatile, with $SPX bounding from support at 1990 to resistance at 2065 swiftly in the past four days. Outside of that range, there is further support at 1975 (the October lows) and resistance at 2090 (the all-time highs). As a result, the $SPX chart remains neutral at this time.
Tuesdays after three-day weekends often produce wide swings. Yesterday was no exception. A higher opening was almost immediately followed by severe selling – knocking $SPX down almost 25 points. But then the bulls found their buy buttons, and the market rallied back to finish slightly on the upside. The support at 1990 remains intact, and it is an important level. Resistance is at 2030 and 2065, the latter being the more important one.
The stock market has experienced huge moves so far this year far greater than have been seen since the fall of 2011. There has been a lot of back forth action, but the bears seem to be gradually getting the upper hand. Yet, the indicators are mixed and it could be that the Standard & Poors 500 Index ($SPX) is just in a wide and volatile trading range.
The feature article is our annual assessment of last year’s recommendations. Not only are the results broken down in a great deal of detail, but there is some commentary on what might be changed in order to improve results and avoid past mistakes.
Our market comment is on page 7. The extreme volatility in the broad market has resulted in a number of technical signals being issued this week. As a result, we are going to recommend a trade in SPY (page 9).
There is naked put write recommendation in Gamestop (GME) on page 8.
The market has been on a rather wild ride for over a month now. With the action of the last two days, our indicators have swung back to a bullish status, for the most part.
The fact that $SPX has now risen back above its 20-day moving average and has closed above 2060 is positive. A second day's close above 2060 would be confirmation of the recovery in the $SPX chart.
Equity-only put-call ratios have rolled over to buy signals.
Investing Editor of CNBC.com John Melloy recently wrote an article for CNBC Pro exploring popular stock market correction strategies. Ryan Brennan of McMillan Analysis Corp. was quoted in the article:
'To hedge an entire portfolio, we recommend the purchase of $VIX calls that are roughly 7.5 points out of the money,' said Ryan Brennan of McMillan Analysis Corp. in an email.
Stocks stumbled into year end, with a couple of down days, the second of which was downright nasty. But was this just illiquid, year-end manipulation (as the bulls suggest) or is it something more serious? It's a little early to tell at this point, but if things don't improve quickly, then the bears have a chance to engineer a correction.
Frankly, I don’t put much credence in long-term projections, and neither should you. How many people have you seen on TV making predictions without the least amount of statistical backing? Those would better be called “guesses” or “wishful thinking.” The worst (or best, if you’re cynical) was the CNBC reporter who made sports predictions for next year.