Where is Santa?

With the last 3-days of selling, traders are starting to wonder, Where is Santa?  Gloom and doomers have been predicting the demise of the 2017 bull run all year.  Now having strung together the first 3-day selling streak since August they are out in force predicting the market top has happened.  Could they be right?  Of course, even a broken watch is right twice a day.  Before diving headlong into a pit of despair take a minute to examine the charts.  The DIA and the SPY are still trending up!  The QQQ’s are suggesting caution, and the IWM is holding a significant support.  Also, take notice that there has been no panic selling and the VIX is not registering fear.  Historically the so-called Santa Rally appears 7 to 10 days after the beginning of December.  Stay focused on price it will provide us the answers.

On the Calendar

The Economic Calendar for Wednesday gets going at 8:15 AM Eastern with the ADP Employment Report.  The ADP has had a rough year widely missing the actual number over and over.  However, ADP was spot on in October with it 235,000 number.  ADP is expecting a 186,000 print for November.  Productivity and Costs will report at 8:30 AM.  Forecasters see nonfarm productivity rising 3.2% with labor cost increasing 0.3%.  At 10:30 we will get the EIA Petroleum Status report which has recently seen supplies declining helping to support oil prices.

We have 50 companies stepping up report earnings results today.  A few of the notable reports before the bell are AEO, FRED, HRB & KLXI.  After the market closes hear from AVGO, LULU, TLRD & VRNT.

Action Plan

Even though the bulls made an effort to gap the market higher at the open yesterday, ultimately profit-taking ruled the day.  There was no panic just a steady stream of slow, deeply controlled selling.  Yesterday the SPY registered the first 3-day selling streak since August.  So does that mean the market top is in and the 2017 bull run has finally come to an end?  I wouldn’t bet on that just yet because the overall trend in the daily SPY and DIA charts still show an up-trend.  The QQQ’s and the IWM certainly suggest caution is warranted but at this time no clear signals of stockholders running for the doors.

The VIX barely moved yesterday and the slow, grinding selling yesterday offered no hints of panic.  If Congress can actually complete one project this year (tax reform) and prevent a government closure midnight Saturday, then Santa might return!  Set aside your bias and focus on the price action for clues.  Listen to the market and avoid trying to predict.

Trade Wisley,

Doug