Santa Claus Rally is on Hold

By December 15, 2013 Market Analysis No Comments

Santa Claus rally is on hold. On December 9th, S&P failed to take out its previous high of 1813.55 and on Friday, December 13th, it closed at 1775.32. Dow Jones closed at 15,755.36.

Markets have tendency to reverse its direction on Winter Solstice. Winter Solstice occurs either on December 21st or 22nd of the year. This year Winter Solstice will be on December 21st which is Saturday. So for our purposes we would consider it on Friday, December 20th. Markets also could reverse 2-3 days before Winter Solstice. This brings us to the time period of December 17th-18th.

Since market is in declining mode before Winter Solstice, therefore, it is safe to assume that market will change its direction from downside to upside during this upcoming Winter Solstice.

We also need to know what event could trigger this reversal. Is there any event coming up leading up to winter solstice? Yes it is! FOMC will meet on December 17th and 18th for rate announcement and other monetary policies. Therefore, it safe to assume that market could change its direction to the upside on December 18th. This analysis has given us the time factor of the market.

The second variable in the market analysis is price. We need to know at what price market could fall to and reverse to the upside. This is based on my technical analysis that S&P could fall to 1765 and as low as 1758. Dow Jones could fall to 15,655 and reverse to upside.

Then S&P has to conquer the recent high of 1813.55. However, if S&P closes above 1800 then there will be high probability that it will take out 1813.55 and will reach 1820-1825 by year-end. The targets beyond 1825 are 1855 and 1875.

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