A Little Santa Claus Rally Underway

Dec 24, 2007: 10:16 AM CST

Traders have been anticipating the occurrence of the fabled “Santa Claus” rally, in which equity prices rise around the Christmas holiday, and it appears it has arrived just in the “nick” of time.

Albeit the rally may not be to the magnitude traders want, but we are seeing a current upswing in price that has taken the Dow above key support/resistance:

Notice how volume declined during the most recent sell-swing, which served as a non-confirmation of the downswing and how volume is increasing so far on the upswing.

The Santa Rally on the NASDAQ Index was far more impressive:

Santa delivered a series of key gaps to the upside over the last few sessions, which also took price above key moving average support/resistance.

“Santa” even delivered the S&P 500 above its key resistance via the moving averages:

Even though price looked bad and the indexes seemed to be on a pathway to retest prior lows, it’s usually a good play to wait to see if a Santa Rally is ahead that will ignore technical charts and indicators.

It’s an overriding “Seasonality” which is also a branch of market analysis, and one that works quite well, but seasonalities often defy technical analysis and chart structures.

Volume will be light following the holiday and prices could be either volatile or stagnant as a result of this.

Trade cautiously if you will trade this holiday week but I will be doing some traveling and spending time with family.

I will also be doing the dreaded ‘end of year trading summary’ and statistics. I still anticipate writing small posts throughout the week.

I wish everyone a great holiday season!



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