Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Thursday, November 1, 2012

Santa Clause Rally?

Stock Market Technical Analysis Blog

Click on image to enlarge

The chart that I have posted above this evening is a four year chart of the Nasdaq showing weekly bars with 5/10/20/50 EMAs.  When the new weekly bar opened yesterday the tip of the red 5 EMA line had pierced down through the blue 20 EMA line and could clearly be seen underneath it. If this technical situation was allowed to continue it would have caused the stock market to suffer multiple weeks of downward movement into Xmas.

Today though the powers that be hit the stock market hard and drove it back up so far today that the flexible tip of the red 5 EMA line pulled back up to the topside of the blue 20 EMA line.  If they can hold the red 5 above the blue 20 through the middle of next week and then start lifting it by the end of next week the odds of having the traditional year end Santa Claus rally has been greatly increased.

The big variable of course is how the market reacts the first few days after the presidential election results next week.  Very few market participants if any will be placing big bets either way until they see the election results and the first few days of trading afterwards.

Nonetheless, seeing them support the market at the week 5/20 juncture at least for today is very encouraging for the bulls.


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