Technical Market Report For Saturday, Dec. 26

The next chart shows the OTC with data beginning in 1963. Until the early 1990’s, the OTC was a small-cap index and its performance was nearly identical to the R2K. In the chart below, the average for all years is shown in blue while the average for the first year of the Presidential Cycle is shown in cyan.

The next chart shows the SPX with data beginning in 1928. In the chart below, the average for all years is shown in red while the average for the first year of the Presidential Cycle is shown in cyan.

The next chart shows the DJIA with data beginning in 1885. In the chart below, the average for all years is shown in grey while the average for the first year of the Presidential Cycle is shown in cyan.

Conclusion

The market has been following its seasonal pattern with an upward bias, and seasonality for next week is strong. The strongest sectors last week were technology and banks, while the weakest were energy and utilities. 

I expect the major averages to be higher on Thursday, December 31 than they were on Thursday, December 24. Last week, the SPX was down slightly while everything else was up; so I am calling last week's positive forecast a tie.

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