Santa Rally Failed

Current position for Active portion of portfolio: SELL – S.T.A.Y. Plus™

Apparently Santa’s sleigh was too loaded down with “coal” to deliver a Santa Rally to the market, as last week the market had yet another decline, continuing to erase last month’s gains.  This most likely has signaled an intermediate top in the continuing downtrend pattern. There have been about four bear market rallies of various sizes so far this year, each of these counter-trend rallies has retraced roughly 50% to 61% of the previous decline. Although some of these rallies, like June-July and Oct-November, can be quite impressive in a Bear Market, however, we are still in a definite downtrend; we continue to have lower lows and lower highs with elevated levels of volatility in both directions, which has persisted all year long. 

I would like to draw your attention to this week’s daily and weekly charts.  The green line that begins at the all-time high of 4819 at the beginning of 2022 and is drawn in line with the peaks of each of the larger counter-trend rallies is a great visual of the downtrend. So far, this year has been a “text-book” example of the definition of a downtrend – Lower Highs and Lower Lows.  Therefore, we are going to stay invested in the inverse of the market until the data proves otherwise.  Furthermore, all three of our monthly indicators are still significantly negative, so we are still in a solid SELL signal. 

​Also, of historical significance, we are continuing to see the pattern of 2007/2008 play out... click here to revisit the market quiz post with updated charts depicting this.

Daily Chart of the S&P 500 (mid-April through last week)

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Weekly Chart of the S&P 500 (Nov. '21 through last week)

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