Are the Charts Giving us Early Indications of a Santa Claus Rally?
Santa Claus, or Father Christmas as they say in the UK, may be smiling early this year.
In Saturday’s free webinar, we discussed IWM (the ETF for the Russell 2000 Index) on a bar-by-bar basis. We noted that IWM was showing strength, though it has been weaker than the other US indices (SPY, DIA, QQQ). Both the S&P 500 and the Dow 30 are very close to making new highs and the Nasdaq has already pushed above its high for the year. Are we about to see a drive up in the US markets to new all-time highs?
Look to IWM to see if Santa Claus is Coming to Town or Running for the Hills
IWM will be the market to let us know. Although lagging behind the other markets, it is in a position of strength. It has had a Wyckoff Spring, has been responding well to that Spring, and is now attempting to negotiate overhead resistance at the 118 level.
We can see on the P&F chart that resistance in IWM is in the 118 to 122 area. If IWM can push through this it will pave the way for higher prices. The count along the 108 line projects a rally to the 133 level for new highs. Larger counts also exist that could bring IWM to news highs in the 145 area, but that is getting ahead of ourselves.
What’s Likely in the Markets This Week
I expect some sideways movement in the US markets this week, but also anticipate this to resolve to the upside due to the strength over the past few weeks. Keep an eye on IWM, though. Any significant weakness showing up in this market will likely drag the overall market down.
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