Santa No Show - What It Means

$SPY

Answer: Who knows.

January brings 3 seasonal barometers. The first ended Wednesday (“Santa Claus Rally”). Historical data shows that a negative return over this period has preceded a full year market gain of 2 in 3 times. The median gain for the market in these scenarios is just 3%.

Next up is the first 5 days seasonal indicator, which ends Monday. This is another seasonal pattern that when negative has coincided with softer full year market gains. This looks poised to also finish negative in the absence of some quick and meaningful reversals.

The final seasonal test is over the full month of January. More on that at months end.

These aren’t predictive indicators. When they’ve been positive, market returns have typically been healthy over the course of the year. But they warrant observation when they aren’t doing what they typically do. The stock market ran for 9 weeks into year end, so this new year softness is perfectly reasonable.

Still, the zoom out on SPY 0.00%↑ is guilty until proven innocent (the seasonal factors mentioned above are measuring the S&P)

QQQ 0.00%↑ looks similar

DIA 0.00%↑ remains constructive as long as it’s above those prior highs. Healthcare has helped early on.

Small caps continue to move sideways IWM 0.00%↑