Even Odds On a Christmas Stock Market Rally

Merrill Lynch sees a questionable December.

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Investors wishing for a slightly less-awful portfolio for Christmas have just a fifty-fifty shot despite the fact that December is traditionally a good month in markets, according to Merrill Lynch strategist Mary Ann Bartels. She writes:

... S&P data shows that, despite the fact that December and January are historically the two strongest months, investors should not count on a Christmas rally. Using the index’s behavior from the Friday before Christmas to the Friday after New Years as a guide, there have only 13 holiday rallies over the past 25 years. In the last eight years (2000-2007) there have been four rallies.

What to watch for:

A base often takes months to complete, can involve multiple tests of the lows, and requires patience. A decline by the S&P 500 back though 840-815 would open the door for another test of 740-700 and perhaps 679-658. As for resistance, the dominant post-May downtrend line is crossing 1158 at the rate of a bit more that nine points per week. The top of the post October base provides first resistance at 1000-1050; second resistance could be as high as 1200-1325, which represented support prior to September’s breakdown.

  • Kirk Shinkle

    Kirk Shinkle is a senior editor for U.S. News Money and manages the Best Funds portal. Follow him on Twitter @KirkS or email him at kshinkle@usnews.com.

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