Market May Prove More Naughty Than Nice

Simpler’s traders have been making their holiday wish list. This testy market wasn’t on it.

The broader market took a solid blow in the indices mid-week as the Omicron Covid-19 variant was revealed in the U.S. Then, like so many times before in the last year, the market rallied hard and higher today.

In a trading environment that can change on a dime, Simpler’s traders are exercising prudence.

Is this latest rebound the beginning of highly anticipated festive cheer in what is typically a season of celebrations, i.e. a Santa Rally?

As traders attempt to gauge whether the market will deliver more than a lump of coal, it appears that patience is paramount when seeking good tidings, well… trades.

Diving into the indices, the Dow and the Russell look similar – with the S&P 500 behaving as the most well-balanced. Even so, the tech sector appears to sputter as its bullish momentum sputters and is causing a bumpy ride in the Nasdaq. Right now, the market looks more like a wacky T.V. variety show and less like a festive holiday event.

This merry season could get nasty. 

Even after the Thursday rally, emotions from unexpected news could overtake market participants, and selling could commence once again. Simpler’s traders look to key indicators to keep emotions and seasonal wishes in check while realistically looking for key levels of support, momentum, and price. 

Looking back at the seasonality expressed in past charts, Simpler’s traders acknowledge this year a Santa Rally may not materialize. The market could be setting up for a December chopfest of bounces and rallies. Still, certain sectors tend to hold their own through the year end.

Healthcare and finances, accompanied by real estate, tend to be solid contenders even in the midst of broader market volatility. Here’s hoping for a healthy, wealthy, and warm hearth in those sectors.

Simpler’s traders are aware that the news does not help them make better decisions. They maintain a laser focus on market equities making a bullish effort. The market doesn’t appear to have the key energy to turn bearish.

Keep in mind, the time to short is likely when stocks couldn’t be any more bullish. The time to buy is likely when things look the worst. Traders would do well to be reminded, as the market ebbs and flows, not to short the lows.

Simpler’s traders, who have no wild wish lists about next year, are keeping their eyes wide open as this market barrels toward the end of the year. The market is going to do what it wants and traders would be wise not to fight the power of market intent.