Market Finds Footing After Week of Struggles
Recent problems in the AI sector seemed to have been forgotten, setting up conditions for a Santa Clause rally.
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After a week of struggles, the bulls finally put together a solid session on Friday. Option expiration created some random movements, but the recent AI problems were forgotten, and sentiment was upbeat.
Breadth was only about 52% positive, but the recovery in semiconductors (SMH) , AI and technology in general made it feel much more upbeat. The Nasdaq 100 (QQQ) led with a gain of 1.3% while the DJIA lagged and finished close to flat. What was most notable about the action was that the stocks that were hit the hardest recently, such as data centers and chips, produced the biggest gains.
There are only six-and-a-half trading sessions left in the year, and the big issue now is whether the much-anticipated Santa Rally will finally gain some traction. There is no more economic data this year, and the option expiry on Friday was the last big event, but there will continue to be rebalancing and window dressing right up to the close on New Year's Eve.
Typically, there is at least one bout of profit-taking close to the end of the year when some investors decide to take profits, harvest losses and start the new year with a clean slate. However, this is a jolly time of the year for small speculative traders, and they will likely create some pockets of trading action for those who want to take a break from the holiday festivities.
Technically, we are in good shape for some upside to end the year, but the bulls were burned this past week and are still a bit gun shy. This is not a time to be overly bullish, but a positive bias is likely to be rewarded.
Have a great weekend. I'll see you on Monday.
At the time of publication, DePorre had no positions in any securities mentioned.
