Stock Market Outlook for Thu Jan 2 2025 – Bounce Likely But Bye Bye Santa

Prior Trading Day Summary:

The final day of 2024, Tuesday Dec 31, saw more profit-taking and lower closes.

The S&P closed down 25 points. As a minimum the Santa Claus Rally needs to gain at least 1% over the close on Monday Dec 23 of 5,974 which would be 6034. On average the Santa Claus rally has returned 1.5%. That means over the next two days the S&P needs to recover 153 points just to have some claim there was a Santa Claus Rally this year.

Volume was poor on New York again with just 3.2 billion shares traded. However 59% of that volume was to the upside and more stocks were advancing on Tuesday than declining.

On Tuesday the NASDAQ lost 176 points and closed at 19310. Volume was excellent at 9 billion shares traded with 55% of that volume traded to the upside but 53% of all stocks on the NASDAQ falling.

Let’s review the technical indicators at the close on Tue Dec 31 2024 to see if there is another chance for a bounce on Thu Jan 2 2025.

Stock Market Outlook: SPX Closing Chart For Tue Dec 31 2024

The index closed below the 21 day and 50 day moving averages and closed at the Lower Bollinger Band. This is bearish.

The closing candlestick signals that the profit-taking is overdone and stocks should bounce and close higher on Thursday to start the New Year.

The 21 day moving average fell back to 6010 which is bearish.

The 50 day moving average is unchanged at 5942 which is bearish.

The 100 day moving average is rising and closed at 5804 which is bullish.

The 200 day moving average is in an uptrend and closed at 5558 which is bullish.

The Lower Bollinger Band is below the 50 day and moving lower which is bearish. The Upper Bollinger Band is rising which is bullish.

The S&P chart is still more bearish than bullish but there are more signals that Thursday will end higher. Note that Tuesday close is near the drop from Wed Dec 18 when Fed Chair Powell spooked markets. We could see a slip lower intraday but a bounce looks likely.

SPX Stock Market Outlook review of Tue Dec 31 2024

Stock Market Outlook: Technical Indicators Review

Stock Market Outlook for Thu Jan 2 2025 

Historically the first trading day of the New Year has been positive 70% of the time since my records going back to 1974.

There are more signals as of the close on Tuesday Dec 31 that the profit-taking is coming to an end and a bounce is probable.

The chance the Santa Claus Rally is gone for this year is probably 75%. The SPX needs to climb, at a minimum, 153 points over the next two days to claim the rally occurred. Otherwise, historically there is roughly a 56% chance 2025 will end flat to lower and probably see at least one correction over 7%, since my records going back to 1974.

While a 153 point gain is certainly possible, more capital will have to show up in S&P stocks and that may not happen until next week when 2025 trading gets more underway.

Overall technical indicators are split but enough of them are pointing to a probable bounce, that investors should anticipate a higher close on Thursday. One economic report however could make a difference to today’s close. The Weekly Initial Unemployment Insurance Claims are due out at 8:30. They are estimated to rise to 225,000 from 219,000 prior. If that number is considerably higher or lower, we may see selling return on Thursday.

Potential Economic and Political Market Moving Events

Monday:

9:45 Chicago business barometer (PMI) stunned with a drop to 36.9

10:00 Pending home sales rose 2.2% beating estimated of 0.7%

Tuesday:

9:00 Case-Shiller home price index was unchanged at 4.6%

Thursday:

8:30 Weekly Initial Unemployment Insurance Claims are expected to rise to 225,000

10:00 Construction spending is estimated to have dipped to 0.3% from 0.4% prior