{"id":20385,"date":"2022-11-29T07:30:30","date_gmt":"2022-11-29T12:30:30","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=20385"},"modified":"2022-11-29T07:30:30","modified_gmt":"2022-11-29T12:30:30","slug":"why-we-shouldnt-bet-on-a-santa-claus-rally-ahead","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/why-we-shouldnt-bet-on-a-santa-claus-rally-ahead\/","title":{"rendered":"Why We Shouldn’t Bet on a Santa Claus Rally Ahead"},"content":{"rendered":"

It’s beginning to look a lot like August… <\/p>\n

And that’s a problem for the rest of the year.<\/p>\n

The stock market rally that started in mid-June and lasted until mid-August was powerful.<\/p>\n

It boosted the S&P 500 by 600 points and got most of the financial world talking about the start of a new bull market.<\/p>\n

But by that time, most of the technical indicators we follow were in extremely overbought territory…<\/p>\n

On August 1<\/a>, the long-term monthly chart of the S&P 500 was banging into resistance. On August 8<\/a>, the Bullish Percent Index for the S&P 500 (BPSPX) was on the verge of a sell signal. And by August 15<\/a>, VIX option prices were screaming at investors to be careful.<\/p>\n

Now, fast forward to today…<\/p>\n

The stock market has enjoyed a strong, two-month-long rally. The S&P 500 is up more than 500 points from its early October low.<\/p>\n

Just about all the financial TV talking heads are bullish again and talking about a new bull market.<\/p>\n

But once again, most of the technical indicators we follow are in extremely overbought territory. They’re warning the market is vulnerable to a decline.<\/p>\n

For example, the BPSPX generated a sell signal last week<\/a>. And now the financial sector is lagging behind<\/a> the broad stock market.<\/p>\n

VIX option prices are predicting a much higher VIX in the weeks to come – and a higher VIX usually goes along with a falling stock market.<\/p>\n

Perhaps most concerning, though, is the VIX just generated its third sell signal in the past six weeks.<\/p>\n

Take a look at this VIX chart…<\/p>\n

\"Chart\"<\/div>\n

The VIX generates a broad stock market sell signal when it closes below its lower Bollinger Band and then closes back inside the bands.<\/p>\n

Unlike VIX buy signals (which often play out right away), VIX sell signals often take several days (or even weeks) to kick into gear.<\/p>\n

Sometimes, it takes the VIX generating a cluster of sell signals before we get a significant move lower in the stock market.<\/p>\n

But eventually, we get the sell-off.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

To see what I mean, take a look at the cluster of sell signals that occurred in July and August. It took three sell signals to finally put an end to the stock market’s summertime rally.<\/p>\n

Within seven weeks, the S&P 500 lost 700 points following that third signal.<\/p>\n

Now, over the past six weeks, the VIX has generated three broad stock market sell signals. The third one triggered last Friday (right arrow).<\/p>\n

If this cluster of sell signals plays out like the cluster we saw in the summer, then stocks will soon head lower.<\/p>\n

Traders should be careful in the weeks ahead…<\/p>\n

Most of the TV talking heads are looking forward to a Santa Claus rally. But the VIX is warning us that Santa may not show up this year.<\/p>\n

Best regards and good trading,<\/p>\n\n\n
\"signature\"<\/td>\n<\/tr>\n<\/table>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/strong><\/h2>\n

What are your stock market expectations for December?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Our technical indicators are warning us the market is vulnerable to a decline…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-20385","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20385","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=20385"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20385\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=20385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=20385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=20385"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=20385"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=20385"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=20385"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=20385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}