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I Still Expect a Santa Rally. Keep an Eye on These 2 Key Charts

by | Dec 20, 2021

It’s officially Christmas week on Wall Street, and the Santa Clause rally is nowhere to be seen… yet.

When I looked at the markets on Monday morning, S&P 500 futures were flashing red — down over 1% as the omicron variant rips through the country… And to me, that’s actually a sign that the upcoming 2021 stock market Christmas rally will be here soon.

Last week, I predicted we’d see a flash of panic early this week, and here we are… 

So what now? 

I expect the flush early in the week to actually pave the way for an explosive rally into the year-end, setting a new cadence of boom and busts in 2022. 

Next year will be incredibly difficult for passive investors, and nirvana for active traders like me.

That said, we’re in what sports fans would call “garbage time” in the markets. This is not the time to put massive cash reserves to work or do anything drastic. 

Sit tight, trade the waves, try to enjoy the holidays and get ready for the new macro trends that 2022 will bring us. 

And make sure to be on the lookout for my special 2022 crystal ball edition newsletter next week!

In the meantime, watch these key charts and trends for the upcoming 2021 stock market Christmas rally.

Key Charts to Watch Ahead of the 2021 Stock Market Christmas Rally

The first chart I’m looking at ahead of the 2021 stock market Christmas rally is the CBOE Volatility Index (VIX).

The Build Back Better bill was killed on Sunday by West Virginia Sen. Joe Manchin, and that news — along with omicron sweeping the world — pushed markets lower worldwide, sending the VIX upward.

I’m looking for the VIX to hit the 30 level early this week before falling quickly as people scoop stocks into the year-end and lower volume names recoup some losses. Remember, a reading of 20 on the VIX is considered average volatility. The higher above 20, the more volatile the market is expected to be over the next 30 days.

In fact, it’s a great opportunity to short volatility into the year-end — which is exactly what my Round Trip Trading Club members did Monday morning.

Check out the trade here!  

I’m also watching the E-mini S&P 500 Futures…

The 4,500 level is a key area to bounce from. If we breach that significantly on the downside, then you’re looking at 4,325 — nearly another 5% lower — to hold. I expect 4,500 to be resilient, at least for the next week.

Besides these two charts to watch ahead of the 2021 stock market Christmas rally, I’m also paying attention to the existing home sales report coming out on Wednesday.

Home sales numbers have been on fire since COVID-19 began, and we’re still sitting at elevated levels of an annualized $6.34 million pace. 

The report in December is expected to rise to a $6.5 million annualized pace, which would be a big boost from last month’s nine-month high. For a market looking for a glimmer of good news, this might be it.

Let me know your thoughts about the 2021 stock market Christmas rally. 

And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel

P.S. My Burn Notice Alerts traders enjoy a minimum of four trades per week… Which quickly adds up to more than 200 trading opportunities a year. 

With so many chances to play the market, my best students have enjoyed profits like 69% on BA… 113% on JOE… and 126% on FB… all overnight!

And that’s just to name a few…

So I want everyone to join me for the first anniversary of Burn Notice Alerts — the Burniversary! 

I’ll dive deep into the portfolio and make other exciting announcements, so be sure to bring a pen and paper! 

Let Me In

WRITTEN BY<br>Jeff Zananiri

Jeff Zananiri

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