S&P Analysis Week of 12/20/2020: Wall Street Naughty or Nice?
We've made it to the last two weeks of the year which has traditionally been called the 'Santa Clause Rally' because markets tend to rise during this time (usually because of low volume).
Will we see a 'Santa Clause Rally' this year?
The first thing that really sticks out in the chart is that we are in a strong upward trend. The trend is your friend until the very end. I would not be quick to short this market until that trend line is broken.
How many people were whiplashed last week trying to short. Friday was a good example of how easily and quickly price can bounce off the lows during an uptrend. It's hard to kill a bull.
Here are the trade setups I see:
Trade Setup 1 (long): Wait for a break above the final resistance line (3720) with a retest and we are going higher.
Note: For those that want to be aggressive. Price technically broke out above 3700 with a retest last week and is starting to make a higher high. You wouldn't be wrong if you decided to take the trade as soon as price goes above 3720 without a retest since there was a retest just below at 3700
Trade Setup 1 (short): Wait for a break of the strong upward trendline (with retest). To be safe I recommend waiting for both the trend line and the strong support at 3642. Be very careful trying to short. I'm primarily looking for a long trade this week so I probably won't take this trade unless I see some strong selling taking place. Not the small dips we have been seeing that get bought up the next day (or even same day).
Never play the breakouts, wait for the retest. In my experience, 90% or more of the breakouts result in a retest.
Happy trading and Merry Christmas!
Will we see a 'Santa Clause Rally' this year?
The first thing that really sticks out in the chart is that we are in a strong upward trend. The trend is your friend until the very end. I would not be quick to short this market until that trend line is broken.
How many people were whiplashed last week trying to short. Friday was a good example of how easily and quickly price can bounce off the lows during an uptrend. It's hard to kill a bull.
Here are the trade setups I see:
Trade Setup 1 (long): Wait for a break above the final resistance line (3720) with a retest and we are going higher.
Note: For those that want to be aggressive. Price technically broke out above 3700 with a retest last week and is starting to make a higher high. You wouldn't be wrong if you decided to take the trade as soon as price goes above 3720 without a retest since there was a retest just below at 3700
Trade Setup 1 (short): Wait for a break of the strong upward trendline (with retest). To be safe I recommend waiting for both the trend line and the strong support at 3642. Be very careful trying to short. I'm primarily looking for a long trade this week so I probably won't take this trade unless I see some strong selling taking place. Not the small dips we have been seeing that get bought up the next day (or even same day).
Never play the breakouts, wait for the retest. In my experience, 90% or more of the breakouts result in a retest.
Happy trading and Merry Christmas!
