My Best Investing Advice as Conditions for a Strong Year-End Rally Develop
Despite ugly price action and the various worries, there are reasons for optimism heading into the Thanksgiving holiday and year-end.
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Following the very robust post-election rally, the market has turned ugly and is struggling again on Tuesday due primarily to worries about an escalation of the Ukraine-Russian war. Other concerns include a less-dovish Fed, who the next Treasury Secretary will be, and valuations.
However, despite the poor price action and the various worries, conditions for a strong year-end rally are developing nicely.
Technically, the market became overheated and extended on the post-election euphoria, but emotions have cooled off, and the indexes are testing the gap that was created on the morning after Election Day. That gap has not been filled so far, but it has provided a key technical support level. If it does fill, it will trigger aggressive buying at a natural support level.
The charts still have work to do, but they are progressing nicely. It may take a few days, but filling the post-election gap would be a very bullish development. If the gap is filled, it will coincide with the very positive seasonality that starts around the Thanksgiving holiday. There is often a surge in speculative trading next week, and that tends to have a very positive impact on the mood of the market.
A third issue that may help the market is that there is likely to be increased optimism about policy moves that Donald Trump will make when he takes office in January 2025. It will all still just be spin in December, and there won’t be any actual results that cause problems until later in 2025. It is much easier to be optimistic about policy if it hasn’t actually been implemented yet.
My bullish prediction looks a bit naïve in view of the poor action on Tuesday morning. Breadth is running more than two to one negative, and it is a sea of red outside Nvidia NVDA and Walmart WMT. Nasdaq 100 QQQ breadth is about four to one negative, and the Russell 2000 IWM is lower for the fifth day out of six.
My best advice right now is:
-- Watch the index charts and see if the post-election gap is filled.
-- Honor your stops and raise some cash. Don’t worry about making bad sales into this poor action. You can always get back in.
-- Have a shopping list ready and watch for support levels on the chart. Be ready to move fast when the price action does improve, and don’t let trades turn into investments.
-- Maintain a positive mindset.
At the time of publication, Rev Shark had no positions in any securities mentioned.
