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Mish’s Daily: Is the Santa Claus Rally Over?

Bond prices plummeted, yields increased, and U.S. 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 ETF 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, and in line with the Real Motion Indicator above, US indices are not oversold. S&P 500 resistance levels to confirm more upside are 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.

If you’re interested in learning more about how Real Motion can help you trade with an edge, contact Rob Quinn, our Chief Strategy Consultant, who can provide more information about Mish’s Premium trading service with a complimentary one-on-one consultation.

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Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

In this appearance on Business First AM, Mish explains how even the worst trade should not be too bad with proper risk management.

In this appearance on Real Vision, Mish joins Maggie Lake to share her view of the most important macro drivers in the new year, where she’s targeting tradeable opportunities, and why investors will need to keep their heads on a swivel. Recorded on December 7, 2022.

Mish sits down with CNBC Asia to discuss why all Tesla (TSLA), sugar, and gold are all on the radar.

Read Mish’s latest article for CMC Markets, titled “Two Closely-Watched ETFs Could Be Set to Fall Further“.

Mish talks the current confusion in the market in this appearance on Business First AM.

Mish discusses trading the Vaneck Vietname ETF ($VNM) in this earlier appearance on Business First AM.

ETF Summary

S&P 500 (SPY): 375 support, 390 resistance.Russell 2000 (IWM): 170 pivotal support, 176 resistance.Dow (DIA): 324 first level of support, 334 first level of resistance. Currently the only index above its 50-WMA.Nasdaq (QQQ): 265 pivotal support, 276 resistanceRegional banks (KRE): Pivotal support is 53, resistance 59.Semiconductors (SMH): Support is 204, 213 resistance.Transportation (IYT): 211 pivotal support, 222 is now resistance.Biotechnology (IBB): 130 was pivotal support and 139 resistance. Closed at 130.56; next level of support 127.Retail (XRT): Closed slightly below 60. 57 pivotal support; 63 is now resistance.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education

Wade Dawson

MarketGauge.com

Portfolio Manager

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