Market Analysis: Here Comes Santa Claus, Here Comes Santa Claus

In our last communication, we discussed that market corrections since 2009 have typically been in the range of 7-10%.  This past summer, and in November, we indicated that so far the market corrections have been normal, and the overall market continues to move in a technical uptrend.  This uptrend has been evident since March of 2009.  Ben Bernanke (Santa Claus) continues to support the market through easing programs.  As we indicated in our last piece, we believe the 2009-20?? market will go down in history as the Federal Reserve’s stock market bubble.

We have put the sluggish October/November behind us, and the market is moving ahead as we anticipated.  In February of 2012, we indicated that we thought the market was going to attempt to go to the 13,500 to 14,000 range.  We still believe the market is headed for 14,000 by the end of the first quarter 2013.

The technical period of what is known as “the Santa Claus rally” is upon us.  Historically, it starts at the end of November and lasts until January 1.  At that time what is known as the “January effect” (another bullish time) typically occurs before a late January/February correction.  So far the path that we have laid out in our communication from February 2012 continues.  We should NOT see any sustainable corrections of more than a day or two in the next four to six weeks.   The Dow should hold any correction, stay above 13,000 and eventually stair step higher.  IF we see a “crack” in this path, we will quickly communicate this to our clients.  Will the Grinch show its face?  The Grinch could be a failure of congress to deal with the fiscal cliff.  Right now, even with today’s correction, the stock market is anticipating the fiscal cliff being resolved within the next 2 weeks.  If the Grinch does come to Whoville (the stock market), or we have any change in our short term forecast, we will communicate to you quickly.

Currently, the storm that we think is coming appears to be arriving in late 2013.  The trend continues to be up, and as they say on Wall Street, “the trend is your friend”.  We will discuss what we see  in mid-January about our longer term stock market forecast.

On behalf of everyone at IAP, we wish you a blessed holiday season.