Santa Is Late, But He Finally Delivers
An oversold market was a positive catalyst for a strong move on the last day of the Santa Claus rally period. Here's where the opportunities lie next week.
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Santa has been a major disappointment recently, but he finally showed up on the last day of the traditional period for a Santa Claus rally, which comes to an end on the second trading day of the new year. While it has been an unusually weak period of holiday trading, stocks were oversold enough to finally trigger a decent bounce.
It was an excellent day with strong breadth and major gains for all the indexes. Breadth was around 7,200 gainers to 2,350 decliners, with the Magnificent Seven MAGS gaining 2.5% and the Russell 2000 IWM jumping 1.5%.
Most notably, there was a strong bounce in Bitcoin, Bitcoin miners, and other cryptocurrency-related names. The group topped on December 17 and has now found support and turned back up. In addition, there was more very strong action in single-digit stocks. My list of 10% upside movers was the longest I've seen in a while.
The election of Mike Johnson as Speaker of the House without a lot of major drama helped to keep the mood positive and increased optimism about Trump's policy moves when he takes office on January 20.
The issue now is whether this action is just a one-and-done situation after the gloom became a bit thick or the start of some positive trending action. Conditions look good for stock pickers next week, and I expect to see more speculative action. Small-caps were beaten up badly in December, but the group has some support and is now trying to move up and out of a trading range. There is some fresh money in the market in the new year and that may help some of the smaller stocks that are good values.
The easiest mistake to make right now is to focus too much on the negative issues surrounding the major indexes. The opportunities lie in individual stocks that have good technical patterns and solid, attractive valuations.
Have a great weekend. I'll see you on Monday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
