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From our end here, it looks as if the numbers for Christmas may come in a bit better than expected. We will still sell the remaining half of our SILJ (Pure Funds Junior Silver Miners ETF) trading position by the end of December.
SPY moved down to test the 676-area support and has held it. An SPY close below Tuesday’s low would call our forecast for an advance into New Year’s into question and we would start to sell some trading positions.
So far, all indexes are holding support areas so we are not concerned with the trading, although sentiment is a bit too bullish. XLI has started a breakout and has real potential into 2026.
We are waiting for the FED news like everyone else. If there is a sharp drop on the FED news, we would buy it. We note that SLV outperforming GLD is often part of a topping process. Be careful with the metals here.
The way this rally is occurring is a bit of a surprise, as the market is broadening out with improvement in small and mid cap stocks. We are close to a new Dow Theory buy signal (we need to exceed the December high.
The breadth over the last couple of days probably puts to rest the chance of a Zweig Breadth Thrust, but regardless of whether or not we get that signal, there has been substantial improvement in breadth – a bullish development.
Breadth has improved dramatically. We will use pullbacks in stocks to add them if they get to our prices.
We still believe a rally into the end of the year is likely, as the current oversold readings support a seasonal advance. There are some real signs of rotation in the market but nothing that prevents our yearend rally scenario.
The McClellan Oscillator, one of my favorite short-term indicators has turned up from a low level. Daily stochastics on SPY and QQQ are now oversold and in position to turn up in buy recycles.
SPY should hold 660 to 650 if we are going to be right about our rally scenario. Watch Value stocks as they should start to show even more relative strength. Our contention is that the Dollar is a bullish pattern, and that a move back above 100 could be the signal for the start of a new rally.