Santa Claus rally to continue in the new year?  US equities Santa Claus rally to continue in the new year?  US equities Santa Claus rally to continue in the new year?  US equities

Santa Claus rally to continue in the new year? US equities

Equities 4 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

 

S&P500 bounced off its short term rising trendline just before Christmas starting the Santa Claus rally lifting the Index to new All-Time highs. We could see a couple of days with minor correction possibly down to around 4.700. However, RSI in bullish sentiment without divergence support short term bullish outlook.

Source: Saxo Group

S&P 500 is still trading in its medium term steep rising channel as can be seen on the weekly chart. Lower rising trendline was tested mid-December until buyers came in lifting the market cancelling out the top and reversal pattern formed in November that could have signaled a larger downturn.
However, RSI divergence is still something to keep an eye on. The strength indicator is not supporting the new highs and the Santa rally took place under quite low volume. However, divergence i.e. an imbalance in the market can go on for quite some time. (see RSI Divergence explained at the end of the article)
Strong support at around 4.495.

Source: Saxo Group

Nasdaq 100 bounced off its support at around 15.638 (seems like 15.543 was the key level) but didn’t manage to perform a new All-Time high.
Despite RSI divergence it is not out the question we could see new highs. If RSI breaks above its falling trendline. However, with the low and falling volume during the Santa rally the bounce is not build on solid ground. We need to see volume coming in.

Source: Saxo Group
Source: Saxo Group

However, on the weekly chart the picture is almost similar to S&P 500. Index is still trading above its medium term rising trendline. However, there are some weaknesses. The Bearish Engulfing top and reversal candle is not cancelled out, divergence on RSI and MACD. Staying above 15.543 is crucial.

RSI Divergence explained: When an indicator such as RSI is displaying lower peaks while the underlying price is still making new highs. It is a sign of imbalance in the market, the strength of the trend is weakening. It could be an indicating of an ending of a trend. However, imbalances in financial markets can go on for quite some time. To cancel Divergence out RSI must either 1. Make a new high simultaneously with the price or 2. Close below 40 threshold. 

Same can be observed in bear market just here market makes a new low but Indicator doesn’t.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.