We predicted a triple-digit move on the Dow yesterday and we said the Fed’s actions and comments could set the next trend into yearend. Following a rally back to the Black Friday highs, today’s slight pullback was expected and it will be important the bulls hold the first wave of support if there is further weakness into the close.
There are also bullish signs as the S&P Volatility Index ($VIX, 13.60, down 0.20) has traded below 13.50. A close below this level would be bullish for a yearend rally and the bulls will need to hold 15 on any pullbacks from here on out. We will have more comments on the VIX in this weekend’s Weekly Wrap as we have some interesting tidbits to report.
Our best guess for the rest of the week and into next week is that there could be a struggle at resistance that could lead to a pullback to support. While it would be nice to see the first wave of support hold, the chances of a lower market into and the day after Christmas could be a good possibility. It happened last year.
Tomorrow is also option expiration day and volatility could return in what has historically been a bullish week over the past 3 decades. We mentioned the S&P 500 has ended December option expiration week higher in 22 out of the past 28 years and given the big gains for the week, this should play out well into Friday’s close. This doesn’t mean the market will automatically end higher Friday as the gains are substantial for the week so a slight pullback won’t hurt.
We will talk about how we see the first part of next week playing out this weekend but for now let’s go check on our current trades.
The Dow is currently up 17 points to 16,184 while the S&P 500 is lower by 2 points to 1,808. The Nasdaq is down 11 points to 4,058.
Subscribers, hit the Members Area for the latest updates and we will be back in the morning with a full report.
Special Note: Gold is getting hammered today as it rapidly approaching our yearend target of $1,150-$1,100 prediction from the summer. Today’s $41 drop to $1,193 is getting closer to triggering our target.