Will we see Santa this year?

 

Here is the thought I shared with my DW Family why we may not see a Santa coming this year. 

Today's hotter than expected jobs report further dampens the hope. 

Wednesday, November 30, 2022

We may not have a Santa Claus rally this year

The last two weeks are typically bullish for the market, especially with the traditional Santa Claus rally where people tend to push the stocks up towards the year end. It happens more often than not and as such, it is widely expected we will see a SC rally coming soon this time of the year. But I'm afraid this year we may not see the Santa come to please people. There are many TA indicators that are flashing warnings for an upcoming decline, potentially even a swift free fall. Here are the recent two indicators to suggest that. 

  

We saw a nice bullish run in the past two weeks or so. However, so far this year, not coincidentally, each of these peaks also occurred alongside tops in the major indexes. And the last two peaks (highlighted by red circles) also occurred as several major indexes were bumping into a major resistance from the moving average (MA).
As you can see below, the rally of the past several weeks once again pushed sentiment into this "Greed" zone just as several indexes are bumping into MA resistance.In other words, today's setup looks remarkably similar to those that marked the end of the bear-market rallies in late March and mid-August this year.In each case, the market plunged to new lows over the next several months. The SPX fell nearly 22% following the March signals and almost 20% following those in August.

Additionally we are also seeing major divergence among key indexes. 

As presented below, the DJIA surpassed its August high on Friday, creating a "higher high." However, the SPX and NDX remain well below their August highs, making "lower highs."Again, this type of non-confirmation can often signal that the market's trend is exhausted, and a reversal is likely.

Based on this setup, the major indexes will likely move lower over the next several weeks. This is not a good sign for a SC rally.