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<\/p>\nThe little boys and girls on Wall Street are disappointed. The widely predicted Santa Claus rally never happened. The S&P 500 finished the typically bullish period of the final five trading days of one year and the first two trading days of the next year down about 50 points.<\/p>\n
Granted, that’s less than a 1% move. And, by itself, it’s nothing to get all worked up about.<\/p>\n
But, as the financial television talking heads have told us so many times over the past two weeks, if the stock market falls during this typically bullish period it’s often a bearish sign for stocks over the next year.<\/p>\n
Of course, over the past several weeks we’ve pointed out numerous other reasons to be bearish on the stock market in the months ahead.<\/p>\n
So, Santa’s “no show” doesn’t come as a surprise to us.<\/p>\n
But, before we get all ramped up and ready to short stocks for 2025… the market is set to rally in the short term.<\/p>\n
Let me explain…<\/p>\n
The PMOBUYALL is a momentum indicator that fluctuates between zero and 100. When it gets to zero, most of the fuel for a large decline has been used up. Traders should look to buy stocks into any additional weakness.<\/p>\n
When the PMOBUYALL hits 100, most of the fuel for a rally has been used up. Traders should look to sell stocks and\/or establish short positions into any additional strength.<\/p>\n
Like most momentum indicators, PMOBUYALL is not an exact timing indicator. It merely tells us when stocks are in the ballpark of a reversal. We can then look to other indicators (like divergences) to fine tune the timing of trades.<\/p>\n
The following chart of the PMOBUYALL can help explain why, even though my intermediate- and longer-term outlooks for the stock market are bearish, stocks are nearing a short term rally phase…<\/p>\n
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