- The S&P 500 rallied quite nicely during the trading session on Wednesday, as, despite the fact that it is Christmas Eve, traders seem like they are willing to at least buy stocks.
- As I look at the market on Wednesday, we are testing the all-time highs—in fact, just a few points below it.
With that being the case, I think we have a situation where it is going to be sooner rather than later that we reach the 7,000 level. Short-term pullbacks are buying opportunities from everything I can see. Looking at the chart, I see the 50-day EMA sitting right around the 6,800 level. The 6,800 level has been important a couple of times in the past, so I like the idea of buying any pullback that gets anywhere near there.
The Santa Claus Rally
For that matter, I also like buying pullbacks that bounce and form a bit of a V pattern that I can take advantage of. In fact, we have just done that over the last couple of weeks, but I would say the same thing about shorter-term charts as well.
The Federal Reserve is anticipated to start cutting rates in 2026, and I think a lot of people on Wall Street are trying to celebrate that fact. Keep in mind that this is the so-called Santa Claus rally in action, where people start to take advantage of other money managers that have to buy stocks in order to either make up some type of list of acceptable stocks to own for their clients. At the end of the year, if you do not own certain names, people ask questions, and they also have to make up a little bit in performance to keep up with the overarching trend and returns of the market.
At this juncture, I have no interest in shorting, but obviously, Christmas Day and New Year’s Eve going into New Year’s Day are going to be days where you are going to have a lack of volume. Friday is a shortened session, so although I feel pretty bullish about this market, I would be cautious there as well.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
