As we now have confirmation, the Santa Claus Rally failed in 2024. I will dig up the stats about the negativity for Q1 and report back shortly. Here is what I learned over the weekend from my friend Rob Hanna of Quantifiable Edges about the last week of December which is always ripe for massive portfolio games. It’s kinda wonky but I will give you the high level view.

First, the Fed sold more than $30 billion of securities from its balance sheet which is a large amount, especially in a week with less liquidity and players at their desks. Second, reverse repos which are agreements between the Fed and the banks soared almost $300 billion. That means the banks had $300 billion less to invest than they did a week earlier. In other words, you could say that in a reduced liquidity environment the markets saw a gargantuan vacuum suck more than $300 billion out which likely led to the decline we saw. The data is delayed one week so we will see if Friday’s rally came on the back of some reversal of Christmas week.

Friday’s rally was nice. Some will say that the S&P 500 has two lows in place and we should now shoot to new highs. I think that is one plausible scenario. And if that occurred I would greet new highs and skepticism. However, if stocks rolled over below those two lows on the far right of the chart I would look for a quick plunge that would be buyable. I know. That’s not much help because the outcomes are binary.

The bulls have the ball now. At a minimum 6050 on the S&P 500 should be seen before the bears step back up.

(Click on image to enlarge)

On Friday we bought FLUT and KRE. We sold SSO and some KIE, QQQW and UWM.

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