Have you ever wondered why such positive market action occurs around the holidays? It's a known phenomenon, the bears go into hibernation and the bulls come out swinging as if in a china shop. It's no coincidence though. For years the buyers have stepped up at this time of year and brought stocks up, but this year is especially interesting.
Many of the stats I have read recently point to a great setup for the bulls to end the year. We can always look to history as our guide to markets -- we do it everyday when viewing our charts/technicals. When the SPX 500 is up 20% or more after October for the year, it is up 5% or so the rest of the year -- every single time! Now, the sample size is not very big, but large enough to be confident.
Further, when sentiment is bearish as it has been lately (just turning bull now), the markets are up significantly. The recent sentiment numbers show a great wall of worry is up -- an ideal time for markets to outsmart everyone else.
Volatility is low and is often at muted levels this time of year. In most instances, when the VIX is low around the holidays the markets have some of the shallowest corrections on record. That doesn't mean we won't see pullbacks, but they should not be all that harmful.
The year 2018 was one to forget, of course. Markets took a turn south in early October as the Fed continued on its hawkish path of tighter monetary policy. That threw the markets into a tailspin, December was a month many would like to forget. It seems that same setup is not here in 2019, though anything is possible with the news cycle and jittery investors/traders.
As long as the trends are pointing up, dip buyers step forward to buy those shallow drops and sentiment improves. We are likely to see several new highs across the board into the end of the year. Minor pullbacks could be nice buying chances.
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Is a rotation into the lagging names starting to gain traction? Let's see.
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