Entering the Santa Claus Week | Trading AMD, F

Statistically, the last week of the year is a good one.

Technical Breakdown 

• NYSE Breadth: 74% upside volume

• NASDAQ Breadth: 73.6% upside volume 

It was a low volume, thin-to-win type of trading day on Thursday. The markets got off to a strong start and didn’t give bulls many opportunities to get long. 

On Thursday the plan was to keep things light and that’s exactly what we did. I wrote, “I’ll likely look to trim some of the longs we have accumulated for this week if we get a decent opening push.”

We got a decent opening push and that rally continued throughout the day, letting us lighten up going into the weekend. That leaves us a good, fairly neutral position to start the week — a position that lets us take advantage of any opportunities that may arise, but not force anything that’s subpar. 

The Game Plan

“Next week is historically a good stretch for the markets. That’s the traditional Santa Claus rally. Over the last 19 years, the SPY has been up 70% of the time for the last week of the year. Same with the QQQ.”

Many traders will prefer to take this week off. I don’t blame them and will again keep things light assuming volumes remain light. 

Fair warning: I may even trim or skip a post or two this week. We have to remember to recharge. If we don’t, we run the risk of burning out and that’s never good — especially in trading. 

That said, it is statistically a strong week of trading, especially if we see tax-loss selling dry up in the final days. Let’s look at the indices. 

S&P 500

SPY Weekly | Click to Enlarge

Above is a weekly chart of the SPY, highlighting just how damn tight this thing has been getting. It’s always good to keep the bigger picture in mind. 

It continues to hold the $450 to $453 area and the 21-week moving average. At the same time though, the $470 to $471 area continues to act as resistance. 

We need a push through resistance, potentially putting that 161.8% extension in play up near $488. 

If there’s ever a week to rally, it may be this week. But keep in mind, from Monday’s low to Thursday’s high, the S&P 500 rallied almost 5%. That’s a huge move in a big index in a short span of time. 

If it needs a few days of rest first, let’s see that it holds the $460 to $465 area — and preferably the higher end of that range. 

Nasdaq, AMD and Ford

NQ futures | Weekly