Santa Claus Rally on Tap?
It’s officially here, but it’s not guaranteed that markets will care.
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Our View
Global equity funds are seeing the largest weekly outflows since March 2020, which is a major stumbling block for the S&P. We knew going into last week that with the $100 billion dollar end-of-year rebalance going on, tax-selling and just about every bank analyst talking about a 2023 recession, that the public has been selling non-stop.
Yesterday I read something that said home sales fell sharply in November and so far in December. Not long ago, the public was sold on the idea that the Fed would soon slow its rate-hiking mission, but the reality is hitting home now that that wasn’t exactly the case.
The S&P
bill of goods that the Fed was going to slow the pace of its rate hikes and now that reality has hit home the S&P has fallen 9.4% in the last two weeks, which is more of a kick in the ass then a year-end uptick.
Our Lean — Danny’s Take
Welcome to the new normal where the S&P rallies 3% one day, then sells off 7% to 10% over the next 7 to 10 days. Ultimately, I don't care how tough you are, all these wild swings will wear you out. It’s why three-day weekends can be so helpful to traders and we’ve got two of ‘em two weeks in a row.
We live in a “what's next” trading environment where any number of headlines can hit and drop the Dow down 500 points in a matter of minutes and the scary thing about it is that it's become so commonplace and no one even mentions it. China's announcement that it's going to open up foreign travel into China should be a positive, but we’ll need more than that for the markets to truly change their tone.
According to my good friend Jeff Hirsch of the Stock Trader’s Almanac, the Santa Claus Rally starts today. Here’s Our Lean and some more info on the Santa Claus Rally:
Our Lean: