The last 3 trading days of 2017 are upon us and the S&P 500, Dow Jones Industrial Average and NASDAQ are all higher between 20-29% for the year.
And the U.S. stock market averages look set to finish the year on a high note.
The period for a “Santa Claus rally” (the last 5 trading days of 2017 along with the first two in January 2018) has started with mixed reviews for investors as the S&P 500 has traded sideways. However, this consolidation looks to be paving the way for a move back higher for stocks given its technical pattern (the chart below highlights this bullish formation).
So it appears that this final period of the year  should turn positive soon. Treasury yields have been pulling back after sharp yield gains to near 2.50%. Commodities are also putting in a strong performance. The Dollar meanwhile has turned lower and should continue lower into early 2018, with USD pulling back vs both the Euro and Sterling.
S&P 500 Chart Spotlight
Near term-consolidation should give way to another rally to new highs and higher into early January. The setup looks bullish for stocks near-term.
Three key developments in the last couple days:
1.  Retailing continues to show sharp gains.. and this sector should be favored for further outperformance, with stocks like M, KSS, SIG, FL all showing sharp gains yesterday and among the top performing of the S&P.  At early December, this sector had arrived at what was thought to be important resistance, but yet the ability to get OVER this resistance has allowed Retailing to start to trend higher sharply. AT present, this still looks to continue.. and Retailing should outperform into early January
2.  Semiconductors still look to be waning.  Yesterday’s pullbacks in MU, QRVO, AMAT, represented some of the worst performance in all of SPX, and Tech continues to lag a bit, with even stocks like AAPL pulling back nearly 2% yesterday.   Technology is one of 3 sectors that’s DOWN over the last month,  with S&P Info Tech index lower by 1%.
3.  Commodities seem to be on the comeback trail.. and Gold, Silver, Crude, Grains and many Softs have begun to outperform and show good strength, with sharp rallies in Precious and Base metals and Crude yesterday moving to the highest levels of the year.   Given Credit Agricole’s J suggesting that strong USD selling should happen into year-end given Year-end rebalancing flows, this could continue to benefit commodities into next year
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Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
