The exciting penalty box trading post July 2009 had returned (chart on the left). We haven’t had a move of greater than 0.5% for 7 straight days. The bulls will argue that it is positive that we are holding up. In addition, we have new month positive seasonality, the beginning of Santa Claus Rally, mutual fund Monday (up 93% of the time in the past 14 weeks) and QE II/Election buying. In 2009, we continued to SLOWLY grind up for several months before a decent sized correction hit beginning of 2010. If that were the case, we could move into the 1200 to 1250 zone by year end.Â
On the other hand, the bears will point out that momentum is dying and we will soon roll over. We also have a sell the news setup next week post mid-term election results and FOMC interest rate decision. Similar to the 2008 Presidential race, the market ran up for weeks in anticipation of a new President. The market topped out near the close on the day of the election, Nov. 4, 2008 (chart on the right). And from there, it plunged 2,000 points over the next 2½ weeks. It bounced from there but ultimately dropped another 1,000 points into the March 2009 lows.
Happy Halloween. Trick or Treat?
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