The idea of a seasonal pattern called The Santa Claus rally came from Yale Hirsch more than 50 years ago. Simply stated, it says that the market generally rallies over the period including the last five trading days of one year and the first two trading days of the next year. On average, the rally has been about a 1% move – nothing great, but certainly worth trading. The seasonal period has just begun for this year: at the close of trading yesterday, Thursday, December 21st.
...Both the equity only and standard put-call ratios plunged to historic lows on Monday as the market gapped to new all-time hights and held on to the gains.
Put buying was heavy enough on Tuesday and Wednesday that a small upward “curl” appeared on both of the equity-only put-call charts and the Total put-call ratio chart. This by itself is not meaningful, but if these ratios begin to trend higher, that would represent confirmed sell signals for the stock market...
The most important technical indicator -- the chart of the S&P 500 Index ($SPX) -- remains steadfastly bullish. It has continued to rise, establishing a myriad of support levels while doing so. Since August 28th, there has only been one day that this Index has even closed below its rising 20-day moving average. That is a strong uptrend.
We have been repeatedly noting that the equity-only put-call ratio charts are at multi-year lows. The charts on the right show visual evidence of this.
These are very long-term put-call ratio charts, extending back 25 years in the case of the standard ratio (upper chart) and 20 years in the case of the weighted ratio (lower chart).
The CBOE will begin trading Bitcoin Futures with Sunday night’s trading (December 10th). These are the basic facts about the contract, as taken from the website (the CME futures begin trading on Dec 18th).
Despite some selling early in the week (that seemed to be more of a reaction to a short-term overbought condition than to any real change of trend) $SPX still remains well above its rising 20-day moving average. It has closed above that MA every day except one since August 28th! As I've said before, that is impressive. So the trend of the $SPX chart is bullish, and that is the best intermediate-term indicator that we have.
The post-Thanksgiving seasonal period got off to a rousing start perhaps too rousing. The $SPX chart remains positive as long as it holds above support. The first support level is at 2600, which is the recent highs and also near today's (Friday's) lows.
Traders are abuzz with the seemingly absurd fact that $VIX is up strongly today (and up for four days in a row), even though the market has risen strongly over that time – and is blasting explosively higher today.
Forget why this is happening. Can this be sustained? The simple is answer is “yes,” of course. Anything can happen – and probably will – is an old adage on Wall Street (and in life). But has this ever happened over a lengthy period of time? It certainly has.
The stock market has signaled that whatever was holding it back for the past couple of weeks ("correction" would be too strong of a word) is over. $SPX and all the other major indices have broken out to new closing and intraday all-time highs. This includes the previously-lagging Russell 2000 Index ($RUT, IWM).
The Thanksgiving holiday in the U.S. brings about several positive seasonal patterns that are generally worth playing. A number of years ago, we used to trade these separately, but then it became apparent that one generally “morphs” into the other, and so in today’s world, these three systems are really blended into one. The three systems, in their original format, were:
