The S&P 500 has been very quiet during most of the month of November, but we are starting to approach the holidays. The month of December is typically a good one for the markets, and the fact that we have been grinding sideways heading into it is a good sign. After all, we will have the “Santa Claus rally”, which is when money managers try to catch up on potential gains or losses that have been accrued. After all, they have a benchmark that they have to work with, so if they do not reach, for example, the gains at the S&P 500, they need to find something out there to profit from in order to show their clients a reason to continue to invest.
Because of this, a lot of traders will chase this trade, because they know so many of their peers need to do so as well. From a technical analysis standpoint, this is a market that has clearly been in a nice uptrend, and I think any pullback at this point will be thought of more or less as a gift. You can see I have drawn a trendline on the weekly chart, and I think that trendline will be respected. The 4500 level is also psychologically important, but when you look at the daily chart, the 4600 level has a significant amount of support built in as well. I think somewhere in that general range there will be plenty of buyers. This is assuming that we can even pull back like that.
There will be the occasional pullback during the month of December, but those will be bought into. I do not think that this market is one that you need to be overly reckless with, but clearly you are going to make much more in the way of gains if you are to follow the overall momentum that has been higher for several years now. As long as central banks around the world continue to pump the markets with liquidity, people will find one way or another to get a gain that beats inflation. The easiest way by far is going to be buying stock indices, especially in what has been one of the best-performing economies in the world.
