"Santa Claus" May Deliver Another Present
By Paul Cherney
There is a seasonal bias for positive price action for the last 5 trade days of the year through to the close of the second trade day of the new year. This is what Yale Hirsch in his Stock Trader's Almanac defines as the "Santa Claus Rally."
Historically for the S&P 500, the odds have been about seven in 10 (73.5% of the time) that the S&P 500 has posted gains during this period of time. The average percentage change over this period of time on a close-to-close basis over this seven-day period (since 1968) has been +1.56%.
Historically for the Nasdaq, the odds have been about seven in 10 (70.0% of the time) that the index has posted gains during this period of time. The average percentage change over this period of time on a close-to-close basis (since 1972) has been +2.45%.
The Nasdaq has been testing intermediate term (a weekly view) "brick wall" resistance in the 1934-2106 area.
Immediate intraday resistance is a thin ledge 1975-1984 which should give way. Above the 1984 level, there is resistance 1999-2027 and 2010-2065. The overlap of these bands of resistance is the focus of resistance for the Nasdaq: 2010-2027.
The Nasdaq has well-defined intermediate term chart support 1965-1853. The index has intraday chart support 1970-1962 and 1942-1913.
The S&P 500 has intermediate term brick wall resistance 1153-1206. There is a focus of resistance 1052-1060.
The S&P 500 has support 1137-1132 but it is doubtful that prices can reach this level.
Downside risk appears limited.
Cherney is market analyst for Standard & Poor's