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The holiday season is here, and with it comes chatter about the Santa Claus rally — a seasonal trend that typically gives markets a year-end boost.
The S&P 500 (SPY) has been holding its ground near all-time highs, but there’s no shortage of uncertainty about whether this bullish momentum can carry into 2025.
Let’s start with where the market stands now.
Monday kicked off with some chop before settling slightly higher, thanks to a gap up at the open. We closed near VWAP — neutral territory — but overall, it was a mildly positive day. When zooming out, though, it’s hard to ignore the broader context.
Ever since Thanksgiving, the market has been stuck in a sideways grind, with no meaningful progress toward key levels.
Those levels are $610 and $615 (we opened just shy of $604 this morning) — benchmarks that could signify whether the Santa rally has real legs. Hitting these targets by year-end would validate the mild bullishness we’ve seen.
However, with just two weeks left in 2024, the market will need stronger momentum to reach them. Low volume and reduced institutional participation — both typical for this time of year — could keep the market in check.
Adding to the complexity is the divergence between SPY and its equal-weighted counterpart, the RSP. While the S&P 500 remains near record highs, the RSP has been significantly weaker, closing lower in 11 of the past 12 sessions.
This disparity highlights how much the market is leaning on large-cap stocks like Apple (AAPL), Google parent Alphabet (GOOGL), and Microsoft (MSFT). These names — part of the Magnificent Seven — have been instrumental in propping up the index, with institutions seemingly relying on them to maintain performance metrics through the end of the year.
So, where does that leave us?
The Santa Claus rally may still have room to run, as Goldman Sachs has suggested, but a potential pullback looms just beyond the horizon. If we see a move toward $610 or $615 before New Year’s, it could set the stage for a bullish start to 2025.
However, the first two weeks of January will be critical — revealing whether this seasonal rally has staying power or if it was merely a holiday blip.
For now, traders should watch those key levels and keep an eye on large-cap activity. The Magnificent Seven will likely continue playing a pivotal role, and their strength or weakness could dictate how the year closes out.
Be sure and join me at 2:30 p.m. ET today for my Santa rally projections, including my No. 1 stock with a Santa rally gamma pocket!
Kane Shieh
Kane Shieh Trading
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