The Santa Claus Rally, yet another delightful story told to
the public by retail brokers, CNBC, and the rest of the warm and fuzzy spin
doctors of Wall Street. But what happens
when the market wakes up and realizes that Santa, like the Easter Bunny and the
Tooth Fairy just isn’t real, but instead is something made up to make the kids
feel cozy and force the adults spend even more money?
No this isn’t a bitter rant but instead a very real point that needs to
be made about the direction of the market over the next few months.
First, here is the bear case for why the market can and will
go down. First, tomorrow’s FOMC announcement. I’m not exactly sure what Helicopter Ben can
say to further juice this rally.
Anything short of the Fed announcing a bajillion dollars for every good
little boy and girl will either be a non-event or a disappointment. Next, the Grinch masquerading around as the
Fiscal Cliff.
The rally over the last
month has been in anticipation in the Fiscal Cliff being resolved. So its resolution has already been baked into
the market. Or, our glorious leaders
will do what they always do and fail in epic fashion to solve the problem. Either letting the Fiscal Cliff pass with no
resolution or Obama ramming higher taxes through will be incredibly
bearish. So again, the bears are in a “heads
I win, tails you lose” situation. And
then lastly, there is my post, Bear Market Holiday Sale posted on November 19th. That is what I’d like to discuss further.
I originally posted this as the predicted action for the end
of the current push higher. Looking
closely, I targeted the 1430ish area and the date December 11, 2012:
Today, December 11, 2012, the market finally marched into
the cloud of 1430 after following the exact path I thought it would.
And now for a freakishly weird “the Mayan’s might be on to
something” coincidence, in my prior post, Point 3 before the big decline in 2007, occurred
on…..December 11th. Lastly,
one final chart. I’m not a huge believer
in candlestick charts but I couldn’t help notice how many major tops this year
have come from the exact daily candle the market just printed. I’ve placed a * on top of each for easier
chart reading.
In conclusion, I don’t trust the Fed to further juice the
market, I don’t believe Washington
can get past themselves and actually solve the Fiscal Cliff in a reasonable
manner, and its worth noticing that the path I thought the market would take to
this point has played out exactly. So I
am staunchly short via SPY puts. The
bulls better have paid cash for their presents because this will be a Merry
Christmas for the bears.
