- Moving the market
The major indexes went through moderate declines early in the session as the markets absorbed recent gains from the holiday week, commonly referred to as the Santa Claus rally.
This phenomenon typically occurs during the last five trading days of the year and the first two days of January. Historically, the S&P 500 has averaged a return of 1.3% during this period, significantly outperforming the market’s average return of 0.3%, according to LPL Research.
This rally is primarily driven by retail investors, as many institutional investors are not active during this time. Therefore, this positive period does not necessarily indicate what will happen in January and February.
In economic news, weekly jobless claims improved slightly from 225,000 to 219,000. However, continuing claims rose to 1.91 million, the highest level since November 2021, signaling potential economic weakness.
Today, the most shorted stocks saw a squeeze higher, but this was insufficient to keep the major indexes in positive territory after a midday rebound, except for Small Caps.
Bond yields fell after an early rise, and the dollar edged slightly higher. Gold defied the trend, gaining 0.71% on the day, while Bitcoin lost its Christmas Eve gains, joining crude oil, which fell back below $70.
With only three trading days left in the year, will the bulls be able to complete the Santa Claus rally?
2. Current “Buy” Cycles (effective 11/21/2023)
Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.
If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.
3. Trend Tracking Indexes (TTIs)
The stock market underwent a turbulent day, initially dipping into negative territory.
Despite a brief midday rebound, the overall bullish sentiment weakened as the session progressed.
By the end of the day, only Small Cap stocks managed to advance in what was otherwise a sluggish trading environment.
Interestingly, our TTIs succeeded in securing a modest gain, defying the broader trend seen in the major indexes.
This is how we closed 12/26/2024:
Domestic TTI: +3.79% above its M/A (prior close +3.62%)—Buy signal effective 11/21/2023.
International TTI: +2.03% above its M/A (prior close +1.77%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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