- The NASDAQ 100 Index has done very little during the trading session on Friday as most traders will have avoided trading altogether.
- Thursday was Thanksgiving in the United States, and therefore there was no underlying trading, and then of course Friday was a shortened session, so that does not necessarily bring in a lot of volume.
- In fact, most Americans simply stay home for both Thanksgiving and the day after, so I would not read too much into the candlestick.
Should We Expect a Santa Claus Rally?
What I do look at is the fact that we had recently broken out, pulled back to the 50-Day EMA, and continue to consolidate in this area. It’s as if the market is trying to figure out what to do next, and you can even make a bit of a bullish flag if you were to squint just a bit. The market then could open up a bigger move, if we break out above the 12,000 level. However, you also need to keep in mind that the jobs number comes out on Friday and a lot of people will be trying to figure out what the Federal Reserve is going to do next. It unquestionably will be influential, as traders look at liquidity as the majority of the reason to trade stocks. The Federal Reserve has created this mess, throwing liquidity into the market hand over fist for the last 14 years. Most traders have no idea what it’s like to trade in an environment where monetary policy is tightening, so it’ll be interesting to see how this plays out.
If we were to breakdown below the 50-Day EMA, we could go down to the 11,000 level. If we can break above the 12,000 level, then it’s likely that we could go looking to the 12,500 level, where we have the 200-Day EMA in that same area. We have recently formed a bit of a “W pattern”, which of course is very bullish as it is not only a double bottom, but it is also considered to be a strong reversal pattern as we are now forming a bullish flag at the same time. We could get a bit of a “Santa Claus rally” for the rest of the year, as money managers trying to buy all of the popular names in order to show their customers that they are invested “correctly.”
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