The traditional and seasonal Santa Claus rally appears to have come rather early this year, with October’s rally for the NQ Emini recording a sensational month of gains following the equally dramatic events towards the end of August which saw the index correct sharply, before strong stopping volume duly appeared to prevent the market falling further. Since then we have seen the index rally strongly, with October’s classical trend high of rounded tops in a rising market leading the way for all the major US indices. Last week’s price action was relatively muted in comparison to previous weeks, with Monday, Tuesday and Wednesday moving higher on rising volume, but as we approached month end a degree of profit taking entered the market, albeit on low volume. Such a volume profile is a strong signal suggesting bullish sentiment remains intact for the time being.
From a technical perspective the key for November will be to see if the high of July at 4677.50 is can be taken out, and if so then the next phase of the bullish trend can build on the solid platform in place. As I have mentioned before, the NQ emini has already breached the deep resistance region created during the extended congestion phase of earlier in the year, and with the other major US indices following suit, the ground is now being laid for further gains in the short term. Much of course will ultimately depend on the FED, and whether they can provide clarity regarding interest rates , but for the time being, Santa has some catching up to do as the traditional end of year rally has come rather earlier than expected!
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading