Marketwatch: Santa Rally Questionable; S&P Facing Upward Resistance
Posted by admin on December 16, 2011
So the Europeans disappointed, again. It was likely that they wouldn’t give the market everything it wanted, but there was hope that there would be enough for a Santa Claus rally. That rally is looking less probably – more hopium (hope + opium), as the pundits would call it. Let’s take a closer look.
As the Europeans approached their major summit on the December 9th, markets were hopeful and were sitting at the 1265 level on the S&P, essentially the 200-day moving average. On the 9th, Mario Draghi, the newly annointed ECB chief, came and said he couldn’t understand why the market thought there would be Eurobonds. The week before he had hinted at some form of stronger action, so some in the market weren’t too happy with his proclamation. The market dropped to about the 1230 range. The next day, on the 9th, the ECB announced some liquidity actions and the Euro summit closed with a framework for greater integration. It was less than the market wanted, and the S&P fell to the 1205 range. In the process, the market crossed the 50 day moving average, which for the instant, has become upward resistance.
For me, it’s not clear yet which way the market will go. I’m somewhat downward biased, but I’m also waiting for a clearer signal. There’s almost no upward catalysts expected until the New Year, and possible downgrades by the credit agencies. Gold has been taking a beating lately, which usually means that someone is selling to be more liquid. That could be a central bank or it could be European banks in need of dollars. That wouldn’t really be a good signal either, though it depends on whether there is more selling.
All in all, hard to tell – for me at least. It’s wait and see for me.
Filed Under: General