Every year as the markets enter the Thanksgiving to New Year’s Holiday period there is talk of the Santa Claus rally related to Seasonality. Year-end institutional portfolio adjustments and tax loss harvesting are the main reasons attributed to the frequent occurrence of strong stock market rallies during December, in particular, the week or two following Christmas. Our use of Seasonals, as we have frequently shared with readers, expected a strong rally during October and November, but not in December. In hindsight, our forecasts were correct as there was no December up move and even the week after Christmas has been a bit blah-humbug! However, the short-term forecast, basis our use of Seasonal pattern, has been looking for a low near Christmas followed by a rally that gains strength into a January peak near mid-month as shown here. The current upside potential for January is only about 3 to 4% to about 4,000 basis the SP 500 Index or even the 4100’s in the extreme.

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Increasing equity exposure moderately for this move is acceptable short term with a stop at the December lows. There is no Bull market yet on the horizon and we expect more waves of selling before the 2nd quarter.

Of note, there are also seasonals trade considerations among individual stocks this time of year. On the close 01-03-23 or on the open of the 4th, short-term traders can consider these stocks that have above-normal seasonal strength during the first 2 to 3 weeks of January.

DJIA ETF = DIA01-03-23 Buy – Exit 01-18 & 22 

BAC Buy 01-03-22 – Exit 01-19-23 

GOOGL Buy 01-03-23 – Exit 01-20-23

UBER Buy 01-03-23 – Exit 01-13-23 

KMI Buy 01-03-23 – Exit 01-13-23 (& 17th) 

BMY Buy 01-03-23 – Exit 01-19-23 

MS Buy 01-03-23 – Exit 01-20-23 

BA Buy 01-03-23 – Exit 01-17-23 

F Buy 01-03-23 – Exit 01-13-23 

Sharing the Seasonal charts for one of these trades, it can be seen that Ford is an example of how seasonal trends have behaved this past year and what is expected in January. Ford (F) and GM along with other autos look very weak beyond January, so this may provide an opportunity for investors to exit some holdings.

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If the broad market price/earnings (P/E) multiples edge higher as earnings move lower, then the stock market does not have to decline substantially this year, but even the most Bullish arguments lack catalysts while the Fed is counterbalancing 40-year inflation highs. The fundamental and monetary impediments to a new Bull market are many and even too well shared by the major banks and brokers, but technical barriers also loom large against an expectation for blue skies anytime soon, without more significant stock market liquidation first. Volatility is at the current low levels only when the stock market is nearing a peak, not a bottom. Longer term investors must remain with defensive and value stocks along with over 30% cash and short-term treasuries yielding over 4.5%.

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