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 19^th.  That is what I’d like to discuss further. 

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On Thursday I wrote a post titled "That Time of Year Again."  Basically, I
was calling for a major snap back rally to take the S&P back to the north
side of 1400.  While the market ripped
the bears to shreds today, another more interesting November needs to be
examined.  And that my friends, is a
November that occurred in the beginning of a bear market; November 2007. 

It seems everyone and their
brother was talking about a possible snapback rally on Friday.  1400 was a virtual given according to
conventional wisdom.  Today’s action
absolutely confirmed that we are in the midst of the snap back rally.  However, the difference between November 2011
and November 2007 is that we are now in a bear market.  As before, I’d like to present a few charts
with numbers (they are markers for my comments, not waves) to make a very
bearish case. 

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Ah, the holidays.  A
season celebrating food comas, Christmas decorations before Halloween, cards
sent to people we haven’t spoken to in a year, and pure market insanity.  My favorite time of the year is back again. 

It is no secret that I love looking at historical patterns
and this year Stock Market Santa appears to be flying down from the North Pole
a month early.  November 2011 seems to be
repeating itself all over again.  Below
is a chart with some numbers and lines on it, read the text below and I promise
it will make more sense. 

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Before the bulls’ heads explode from the massive one day 11.54
point rally in the S&P let me come to the rescue and pour some ice cold
water on the euphoria.  I’m going to keep
the prose to a minimum and just offer a series of charts.  The first three are the last three major
double tops IN WHICH the right peak just fell short of the left (this is hugely
important psychologically).  The last is
just a little bear porn that might just morph from fantasy to reality.

July – August 2011

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