12:30pm (EST)
When figuring out where the market or a stock will be or won’t be over a certain time frame, we like to use fundamental analysis and technical analysis for determining which direction they may go but it is also important to use sentiment, momentum, rumors, headlines, and a host of other factors. No “system” is perfect which is why we DON’T have one and rely on our 25 years of market experience to help us make our trades. We also like to use stock market history, the VIX, metal prices, currency prices, world markets, and hours and hours of daily research to predict where the market or a stock is headed over the next few weeks, months and for the year. With these things constantly changing, it is important to watch everything when it comes to investing in the market.
That being said, we wanted to check the “Santa Claus Rally” that didn’t officially start until AFTER Christmas and runs the last 5 days of the year and the first 2 trading sessions of the New Year. Every year, the talking heads and many of the Wall Street pros will predict a Santa rally BEFORE Christmas before they take the rest of the year off. We reminded you again in mid-December that Santa comes after Christmas when it comes to the market.
Believe it or not, the Santa rallies have averaged 1.5% over this time frame for the last 60 years when the market moves higher. If the market moves lower, then it can be a warning sign for an upcoming bear market. The Dow started at 13,138 on the day after Christmas and the S&P 500 was at 1,426. The Nasdaq was at 3,012 while the Russell stood at 844. We will check these numbers over the weekend to see how the indexes performed as the Santa rally ends tomorrow on the close.
Today is also the start of the first five days of January that is often a good tell on market direction for the month and year. We will talk about all of these forces this weekend with our typical chart work as the bulls push the top of the trading range.
It is always a little risky buying a breakout but our portfolio was light as we came into the year and the 2 trades we took this morning are on stocks we have followed for years. These plays are longer-term positions based on a rebound in one sector that has not participated in the year-long rally and on another stock we strongly feel could be gobbled up by Google (GOOG, $720.85, up $13.47).
We do have open trades for our Weekly Wrap, including our Bank of America (BAC, $12.00, up $0.39) recommendation that is now up over 20%.
We started loading up on BAC in December 2011 at $5.36 a share and we have made 20%, 26%, 6% and now we are up 20% on our covered calls. We have a price target of $15 for BAC at some point in 2013 but that may be conservative.
The resistance targets we gave you this morning are sticking like glue: Dow 13,350; S&P 1,450 and Nasdaq 3,100. We could see some fluff and a push to new 52-week highs as we enter the start of earnings season next week but it will be important for the bulls to show some follow though over the next few days.
As we head to press, the Dow is up 226 points to 13,330 while the S&P 500 is higher by 24 points to 1,450. The Nasdaq is zooming 66 points to 3,085 and has traded to a peak of 3,103.
Subscribers, check the Members Area for the updates and we will be back in the morning with a full report.
Special Notice: We have extended the deal on our 1-year membership for one more day as we realize many of you are getting back from the holidays. If you don’t have the code, look on the website from Monday’s update or email our support team. We have a video coming out this weekend for the trading course and the manuals will ship out in 2-3 weeks so hurry up before this offer ends!
