Post Rally Strength Stalls Pullback

2022-01-04

The trading spirit of Christmas showed up at what seemed like the last minute of 2021 and gave the lagging enthusiasm of the market a kick in the pants.

Such a run into the new year kept Simpler’s traders still believing in the Santa Claus rally. And retailers, some of whom experienced record-breaking sales, enjoyed an added bit of cheer, as well.

As this year dawned, the rallying spirit brought along with it momentum that traders look to for potential setups in an otherwise quiet season. Simpler’s traders anticipate squeezes across the indexes and a potential for a gap-up as 2022 gets rolling and the market indicates it could reveal some bullish consolidations.

The squeeze is the play to watch in this new season. A short squeeze in the market occurs when a stock’s price increases and its purchase volume spikes as short sellers exit their positions to cut losses. There is a hint of this happening in the equities.

Traders are watchful of any dips lower to buy. 

Traders watched as the Nasdaq tested 16,000 and squeezes began to form across the indexes before a skittish pullback hit the Nasdaq this week. The bullishness in the Nasdaq has offered support the market needed. When combined with strength in the other indexes, all appear to be keeping a significant pullback at bay in an otherwise unassuming week.

As Simpler’s traders watch the market fight to gap up, they are working to hop on to the celebration train sooner, rather than later. And, if everything goes as expected, market strength could carry on in this manner for the next two or three weeks.

This gives traders opportunities to consider long trades while keeping an eye on the charts for more cautious entries.