My very best wishes to investors for a Merry Christmas. I’ll save the Happy New Year for next week. It’s been a great year for my portfolio with returns up over 34% and the bull market which started in March 2009 still intact. Since March 2009 stock indexes have recovered almost all that was lost in the bear of 2008 to 2009. The NASDAQ has recovered all the losses of 2008-2009. It has been an unusual time though with continual government intervention and hundreds of billions in liquidity. The Federal Reserve continues to keep the party going at the stock market and continues to penalize those who hold large amounts of cash.
Today market’s direction was down the entire day as investors remain concerned about the fiscal cliff. The chance of a resolution by year-end is slight, but no one knows what the results of no resolution will mean to the US economy. At this point everything is conjecture and theory. Meanwhile the chance of a resolution early in the year remains but with both Republicans and Democrats posturing to what they obviously believe are political points, it still is questionable whether a resolution will be reached.
Without the fiscal cliff it would appear that stocks would be higher as there remains strength within the markets themselves.
Santa Claus Rally
We are now into the Santa Claus Rally period for December to January. In the past when there has been no Santa Claus rally stocks in general have slid into a bear market sometime during the following year. This year could be a tough call though if there is no Santa Claus rally. The fiscal cliff is the focus of investors and the lack of a resolution could easily mean the end of any possible rally but it may not mean the end of the bull market if in January a resolution is reached. Any resolution may lead to a rally.
Market Direction Technical Analysis of Dec 24 2012
Today was a short day and being Christmas Eve the volume was low. The market direction technical indicators will not be as reliable today for forecasting after Christmas Day, but are still worth a look.
Market Direction Technical Indicators for Dec 24 2012
For Momentum I am using the 10 period. Momentum is still positive but today’s decline is placing momentum to the point of falling into negative territory.
For MACD Histogram I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) is still positive but took another big hit today.
The Ultimate Oscillator settings are Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
The Ultimate Oscillator is still positive but today it is negative showing that most of the action today was selling.
Rate Of Change is set for a 21 period. Rate Of Change is still positive but took another big decline today.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling lower market direction after Christmas Day. This marks the second day of declines in the slow stochastic which lends merit to the market direction outlook after Christmas Day.
For the Fast Stochastic I use the K period of 20 and D period of 5. These are not default settings but settings I set for the 1 to 3 month S&P 500 chart when it is set for daily. The Fast Stochastic is signaling strength is building today for the market direction to continue to move lower.
Market Direction Outlook For After Christmas Day
The market direction outlook for after Christmas Day is for the overall market direction to continue to push lower. A resolution to the fiscal cliff issue could change market direction overnight, but as that seems unlikely short-term, the market direction looks to be setting up for more downside after Christmas Day.
At this point I have not made any changes to my Put Selling trades that expire in January but I am holding capital back from those Put Selling trades that ended with the trades expiring out of the money. At this point I see no reason to put that capital back to work immediately after Christmas until I see what market direction will be and whether Santa makes an appearance.
Merry Christmas
Christmas is a wonderful time of year and a chance to spend time with loved ones and friends. Enjoy the season and my best wishes for a very Merry Christmas to you, your loved ones and your friends.
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