Santa Rally on Hold

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S&P 500 down 3.8% for the Week

By Doug Short, Advisor Perspectives:

Expectations of a Santa Rally went further on hold this week. Our benchmark S&P 500 plunged at the open, triggered to some extent by a savage selloff in oil (WTIC is down -14.5% month-to-date). The 500 proceeded to slide deeper into the red, hitting its -2.13% intraday low early in the final hour. The index closed with a -1.94% Friday loss, and a weekly loss of -3.79%.

The yield on the 10-year note dropped to 2.13%, down 15 bps from last Friday’s close.

Here is a snapshot of past five sessions.

S&P 500

Here is a daily chart of the index. Volume picked up on today’s selloff.

S&P 500

A Perspective on Drawdowns

Here’s a snapshot of selloffs since the 2009 trough.

S&P 500 Drawdowns

For a longer-term perspective, here is a log-scale chart base on daily closes since the all-time high prior to the Great Recession.

S&P 500 Snapshot

Here is the same chart with the 50- and 200-day moving averages. The 50 crossed below the 200 on August 28th.

S&P 500 MAs

And the next crisis hasn’t even begun yet. Read…  It Starts: Junk-Bond Fund Implodes, Investors Stuck

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  3 comments for “Santa Rally on Hold

  1. Nick
    December 12, 2015 at 2:27 pm

    This seems as good a place to ask as any . . . I’ve never understood the foundation of technical analysis. From what I understand, it’s an approach that says that patterns in different measurements of asset movement are meaningful, in ways that are divorced from the underlying specifics. Has this been demonstrated statistically? — by which I mean, can it be shown that a stock that has demonstrated a certain pattern of movement is more likely to do one thing instead of another, compared to all the stocks that do not currently show that pattern?

    Apologies if this is off-topic. Personally, I’ve always found the movement of stocks to have a strong component of the Drunkard’s Walk in them, and have suspected technical analysis of being something that finds spurious patterns in chaos; but I’m not trying to troll people here, I’m just curious.

    • Petunia
      December 17, 2015 at 3:42 pm

      You are not wrong. Technical analysis is based on patterns in the financial markets repeating as they often do in nature. Sometimes it works and sometimes it doesn’t. Like astrology, sometimes it’s right and sometimes it’s not.

  2. Uncle Frank
    December 23, 2015 at 10:06 pm

    Well, the Santa Rally appears to have arrived beginning the week of Christmas.

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