Stock Market Holiday Rally Looks to be a Turkey

By: Ed_Carlson

A rally into the U.S. Thanksgiving holiday is standard fare for the equity markets as it is for most holiday-shortened weeks. There should be plenty of meat for the bulls; unfortunately, it looks to be a bull-trap.

Leading cyclical groups such as semiconductors appear to be setting up for a rally. The SOX has broken its downtrend with the rally on November 1.  A rising bandwidth indicator (BWI) confirms the rally by its advance and signals a non-confirmation of the decline of the last several days with its own decline.

Before the rally begins, however, a mirror image interval has the potential to occur as the distance between the lows on 12/19/11 and 6/4/12 is 168 calendar days. Counting forward an equidistance of 168 days targets a possible low on Monday, December 19 – just in time for the seasonal rally into the Thanksgiving holiday to begin. 

This forecast matches my expectation of this date as a fade-date (fade whatever move is seen on this day). A 107-day interval (102-112 calendar days) from a market inflection point (8/2/12) exists and is 38.2% of the distance between the forecasted date (11/19/12) and another market inflection point (2/9/12). When combined with a 221-day interval (221-225 calendar days) this creates a fade-date. 11/19/12 is 223 days from the low of 4/10/12.

That’s the set-up for our holiday rally but why expect it will be a ‘turkey’?  Because an ascending middle section points to a market high on November 26.  Point C on 12/13/11 of an ascending middle section counts 174 days to the low on 6/4/12. Counting forward an equidistance of 174 days targets a turning point on Sunday, November 25.  Ascending middle sections normally count to market highs. This high occurs just after the Thanksgiving holiday and is expected to kick-off a final market decline prior to the year-end Santa Claus rally.

Ed Carlson, C.M.T.

A full examination of the current equity market using the methods of George Lindsay including the standard time spans (as well as the Three Peaks and a Domed House and other models) is available. Send your request through the Contact Us page at Seattle Technical Advisors.com and reference this article.

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