Don't Hold Your Breath for a Santa Claus Rally

[Archives]( Live]( [Twitter]( [Youtube]( [Instagram]( [Discord]( [Tiktok]( [Do You Have a Supercomputer?]( In the last 11 years, there has been an over 30X increase in the amount of data flowing in and out of the market daily. If you don’t have a supercomputer, there’s literally no human way for you to track, analyze, and act on this data… so Tom Gentile built a system to do just that. It runs 24 hours to analyze billions of data points and essentially automates profits… and he’s giving you access to its output. The most recent output was a trade that closed for a partial gain of 100% in 24 hours. The rest of that position is sitting around 180%. [Click and get on the list for the next MEGA Trade]( MAIN STORY Don't Hold Your Breath for a Santa Claus Rally By Tom Gentile. Dear reader. It doesn’t take but a few seconds for the markets to react to Fed announcements. On Wednesday, the Fed increased interest rates by an expected 0.5%, and the market’s 2.2% intra-day gyration ended with indecision – marked by a spinning top candle formation. The indecision was not only marked by the daily candle, but also, despite the market falling by 0.64%, the volatility index (VIX) dropped – which tells us investors are complacent in fear. Well, complacency won’t last, and the Fed’s Summary of Economic Projections (SEP) is painting a concerning picture, so let’s talk about what we can do to protect ourselves and prepare for what’s coming. December Is Normally a Bullish Month – This Year Will Be Questionable Ordinarily the market has a higher probability for gains in December than other months. After all, no other month has a Santa Claus rally, which refers to the S&P 500 rallying the week before the Christmas holiday, and while it’s still possible for a pop in the market, the lower it falls, the less chance it’ll have for gains this month. With the market off nearly 4.5% from November’s close, the downward momentum may prove overbearing. Fed Talks, Market Walks Earlier this year the Fed announced interest rate hikes and the market responded, and rate hikes have been the mainstay for high volatility levels this year. In May, the Fed’s 75-bps hike resulted in a 3.6% market decline in a single day. Now remember, the volatility index (VIX), has an inverse relationship with price. If the market rises, the VIX declines. So, when the market dropped 3.6%, it was accompanied with a 23% spike in the VIX – denoting tremendous fear. Then in June, the Fed’s interest rate hike resulted in a 3.3% market decline and an 11% pop in volatility followed. But last month, with another 75-point rate hike, the market dropped 2.5%, and this time the VIX was unchanged – showing less concern for the market. And this week, as the Fed made its final rate increase for 2022, the market vacillated, but then fell only marginally from the prior day. At the same time, however, the volatility index dropped – which is an indication that market participants aren’t sure what to do. Perhaps market participants just needed another day to consider what the Fed is telling them. The Impact of The Summary of Economic Projections The Fed’s Summary of Economic Projections (SEP) comes out four times each year, with the latest release this month, and offers projections for our economic future. To close the damper on inflation, the Fed’s key tool is interest rates, and the Fed is clear about raising rates into next year and has increased the target rate forecast of 4.6% to 5.1% by next year. And, inflation is expected to be above its longer-term target of 2% for the next two to three years – a sign we may experience elevated levels of inflation for years to come. Finally, the drivers of the economy, people like you and I, are likely to be impacted by unemployment rates rising – which can result in a stagnate economy. This year unemployment has hovered around 3.7%, but it’s forecasted to rise near 4.6% next year, and stay high into 2024. This means another 1 to 2 million jobs lost – which will certainly curb economic growth. With the influence of inflation lasting into the next few years, along with a Fed’s focus on interest rates, the unemployment rate is expected to find itself higher than this year all the way into 2025. Savings and Smart Trading Nobody needs to tell you that you’re not getting the best bang for your buck these days. Your buying power is down with the cost of gas, food and housing, but there are a couple of things you can focus on. Let me remind you that in trading and investing accounts, cash is a position. The yield curve is inverted, which means short-term fixed income investments are yielding higher returns than longer-dated ones. Something you can do now is to take advantage of higher yields anywhere you can find them. The current environment lends to adding more to saving while you’re spending less due to inflation. The latter part of December can be a time to reflect and get prepared for the upcoming new year. So, the other thing I’d have you do while you’re building savings to capture higher yields on short-term investments – please join me for some of the final discussions this year. You can find me live each Monday through Wednesday at 12:00 ET to find out what I’ll be watching for in the coming months to help you build wealth. Warm regards, Tom Gentile America's #1 Pattern Trader Join Tom each Monday through Wednesday at 12:00 p.m. ET as he discusses a range of strategies to make money in a strained market environment. Did you miss the Live session? Watch Tom’s replays!   FEATURED ARTICLES [The Rally Won't Last - Here's What to do.]( [Five Indications the Market has NOT Bottomed]( [This Bear Market Rally Could Prompt a 2001-style Crash](   GET STARTED [Options 101: The Easiest Options Guide You’ll Ever Read]( With anything and everything you’ll ever need to know about trading options, this is the best guide to making money in the markets you can get. [Straddles – How to profit up or down!]( Is there a way to trade options regardless of market direction? The answer is YES! Straddle trading takes the guess work out. Straddles can profit if the stock’s price rises OR falls on speculation. [Earnings: The IV Crush]( Trading options is a zero-sum game, meaning there will always be a winner and a loser on either side of a trade. Trading through an earnings report and losing in spite of the fact that the underlying stock price went in your intended direction can feel like getting stung by the biggest bee in the hive – Ouch! 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