Is That Sleigh Bells I Hear?

Black Friday is in the books, and Cyber Monday is here.  So far, the online numbers look pretty good.  And the abbreviated Thanksgiving trading week finished pretty decent as well.  So…  you better watch out, you better not cry, you better not pout, I’m telling you why…  there’s a good chance Santa Claus is coming to town.  Because this market has been in rally mode all year.  Why would it stop now?

A December climb in the market is traditionally known as a Santa Claus Rally.   And, if technical market behavior is any indicator, this market could surprise everyone this year.  2600 is in the books.  Can we take out the 2625 level?  Or hit the 2632 extreme level projected back in January?

The answer to both questions is yes – it’s possible.  And at this point, it’s a move of less than 1% to get there to 2625.  It will not surprise me if both levels get taken out in the coming weeks.  The bigger question is, can markets hold these levels?  Or will we see a pull-back to somewhere below 2600 by year-end?

That story is yet to unfold.  For now, keep those Santa Rally Caps on.  Key numbers are still the round ones — 2575 for support, 2600 for the pivot, and 2625 for resistance.  Look for 2606 to be a funny area as well — above the major 2600 level, but lately it seems many traders (or perhaps software programs) give just a little extra wiggle room in their trading objectives — so the markets may trade above the ‘big’ obvious numbers, only to meet resistance just slightly above or below those key levels.  You can also look for support at 2591 and 2686 — for the same reasons.

Volatility may increase slightly in the coming weeks as mutual fund managers begin window dressing and harvesting gains or losses before the end of the year.  This shouldn’t change the support/resistance much – just the intra-day swings.

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