SANTA CLAUS RALLY BECKONING?

One thing about the Stock Market is its propensity to surprise people and catch them off guard, bull and bear alike. So just when everything pointed downwards towards a test of 1370 on the S&P (August lows), the Bulls took control and sent the DOW up for the largest two-day consecutive gain in 5 years. The fact that the Index managed to go up the third consecutive day (for a meager 25 points) was extremely significant. If DOW manages to have shallow corrections (or correction by time), then we could see a year end Santa Claus rally, and subsequent January effect. The charts on the S&P500 show the entire picture. We are not smack at the 200-MA, and are attempting a significant crossover. Going up would mean a rosy picture for stocks, Carry trades, and Commodity currencies, which have seemed to lost a bit of their luster as the DOW tanked 10% (normal correction) the past one month or so.
Nothing beats experience when it comes to analyzing the market movements. On the Monday Morning outlook, Bernie Schaeffer (one of the most respected Options traders) had this to say, “My colleagues, Bob Becks and Joseph W. Sunderman, took a look at the implications of a low ISEE call/put ratio (below 90). In their quantitative study, they eliminated signals that occurred within 20 days of the first signal, due to the tendency of these extremely low call/put ratios to occur in clusters. That leaves a total of seven unique signals. Ten trading days after these signals, the SPY has been positive 86% of the time with an average gain of 1.1%. Thirty days out, the SPY was positive 100% of the time, with the average return being 3.2%. The 90-days period following such a signal is really impressive. The SPY was in the black 100% of the time with an average return of 9.1%. Unless we're transitioning to a bear market, which I highly doubt, this study suggests that it's a good time to be long the market, no matter how gut-wrenching it may be on a day-to-day basis.”

The only roadbump I see ahead is the Interest rate announcement on December 11th. It’s likely we’ll be a getting a rate cut. The issue is: Will the market be happy and take us to greater heights, or will disappointment set in and lead us to August lows. It’s all up to Ben now!

Chief Shook