Move Over Nvidia. Santa's Ready to Rally.
Nvidia has led stocks higher recently. But Wednesday is the day that the Santa Claus rally is expected to begin.
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NOTE: I am taking the remainder of the year off. My next column will be Monday, January 5th. Wishing everyone a great holiday season and an even better 2026!
Wednesday is the official day the Santa Claus rally is supposed to begin, but it seems to have started four days ago. Of course, for two of those four days, it has been more like the Nvidia (NVDA) rally.
Tuesday wasn’t great if you were part of the 493, similar to the way Friday wasn’t great for the 493. I would not be one bit surprised if we saw the market pull back for a day or two before trying the upside again. You can feel the complacency in most stocks as they just sort of churn around.
Now the McClellan Summation Index has not rolled over yet. A net breadth day of -200 (advancers minus decliners on the NYSE) would turn it down, which goes to show you how disappointing this rally has been so far.
But it’s the Nasdaq McClellan Summation Index we should look at. It has not rallied at all since that November low. And thus far, the last four days haven’t seen it join the party either. This is despite the fact that Monday, we saw quantum, rockets, and AI stocks come to life again. This indicator needs a net differential of +1.8 billion shares (up minus down volume) to halt the decline and more to turn it up.
That is actually not that hard to do. Monday saw net volume at +2.3 billion shares, and Tuesday saw it at -1.2 billion shares. I find Tuesday’s reading to be concerning because the Nasdaq was actually up more than it was on Monday. There is a lot of deterioration under the hood in Nasdaq. It’s one reason I think we will see a larger correction sometime in the first quarter. You cannot keep a divergence like this going this long (now at nearly three months) without something giving way.
Just to finish up with the stock market, the Daily Sentiment Index for the S&P and Nasdaq is now 73 and 71, and the VIX is 17. They are not extreme, although the VIX is bordering on it.
It is the metals that are getting extreme, and Palladium has gotten extreme. Palladium’s DSI tipped over 90 to 91 on Tuesday. Long-time readers will know I have been a Palladium fan for a long time, but when the DSI gets over 90, I say it’s time to take something off the table. And the weekly chart shows it is pushing up against resistance.
Platinum’s DSI is at 89, so it is knocking on the door of extreme. Think of it like when you drive through a yellow light just before it turns red. Gold is at 85, and silver is at 89. The end-of-the-year momentum might take all these metals further into extreme, but I’m not a fan of commodities when the DSIs get this high. I know I won’t catch the exact high, but sentiment is now extreme in Palladium, almost extreme in Silver and Platinum, and pushing into extreme territory in gold.
