Has The Santa Claus Rally Started?

  • November 3, 2004
  • Mark Melin

Tuesday Recap:
The
markets started the day higher on expectations that the election would bring
some sense of certainty to the market.  Then, just as I came back from lunch in
Chicago I started to hear rumors float through corridors in between the CBOT and
the CBOE that the turnout and exit polling was heavily favoring Kerry in
Pennsylvania, Florida and Ohio — and the market tanked, moving from an
approximate 70 point gain on the Dow to an 18 point loss — and this is when we
got delta positive.

Prediction for
Wednesday: 
I anticipate that we’re going to start the Santa Claus rally on Wednesday.  I
think that we will end the year above the 10200 level and potentially above
10400.  On an intraday basis, I’m going to watch for a quick test of 10125.  If
and when we clear that level, we could then hit the downtrend line I’ve noted on
the chart below.  Depending on when we hit this level we will likely pull back
after hitting that downtrend on the first attempt, but ultimately I expect it to
be broken.  However, I’ll start to know I’m wrong or something major has
happened if we break below and hold under support near 9980-10,000.


Portfolio
Strategy:  We’re likely to get additionally delta positive on Tuesday. 

Mark Melin