After last week’s sharp correction and strong end-of-week bounce, this week’s continuation rally came as little surprise. It’s Christmas time, after all, and with it traditionally comes the ‘Santa Claus Rally.’ However, the rebound has shown little real strength thus far, seemingly driven more by oversold conditions and short-covering rather than by conviction-driven buying. Meanwhile, in other news:
Next week marks the final two trading days of 2024 and the start of the new year. The return of traders from holiday downtime could bring a wave of fresh positioning, which is likely to fuel increased activity and heightened volatility. Let’s examine the individual indexes to evaluate their setups as we approach the year’s end.
Weekly Analysis
SPY (SPDR S&P 500)
The SPY ETF displayed constructive price action for much of the week, but Friday’s weakness led to just a modestly higher close at $595.01 (+0.71%). After nearly retracing the entire length of last week’s drawdown, the price reversed and finished below the Election Day aVWAP, raising the likelihood of further downside. Lower highs often lead to lower lows, so if selling pressure intensifies next week, the 100-SMA will be the critical support level to watch.
QQQ (Invesco QQQ Trust)
The QQQ ETF maintained its position as the most constructive of the major indexes this week, closing slightly higher than last week at $522.56 (+0.75%). Unlike the SPY and IWM, which have faltered below their Election Day aVWAPs, the tech-heavy index has held firm. Heading into next week, this key level remains crucial to monitor, barring any significant weakness.
IWM (iShares Russell 2000)
The IWM ETF continued to lag behind this week, clinging precariously to the 100-SMA and closing nearly flat at $222.39 (+0.17%). If buyers can stick the landing here, it is possible that we might see the price rise off this level in the final days of the Santa Claus Rally, pending it continues. There’s a volume gap above that could provide the momentum to drive the price back towards the Election Day aVWAP.
Earnings
Notable Results
BLIN (Bridgeline Digital)
- EPS: $0.0 vs $(0.01) est
- REV: $3.86M vs $3.87M est
LMNR (Limoneira)
- EPS: $(0.09) vs $(0.07) est
- REV: $43.86M vs $42.45M est
EBF (Ennis Inc)
- EPS: $0.39 vs $0.39 est
- REV: $99.77M vs $98.33M est
AVXL (Anavex Life Sciences)
- EPS: $(0.14) vs $(0.17) est
- REV: $0.0 vs $0.0 est
What’s Happening Now
NFLX (Netflix)
The new year fast approaches and NFLX is preparing to enter a period of strong historical outperformance. January has consistently been a standout month for Netflix, boasting an 80% win rate years with an outsized average return of 20% for the past 15. With strong Q3 results, including 15% revenue growth and record subscriber additions, NFLX is well-positioned to start 2025 on a high note.
QQQ (Invesco QQQ Trust)
QQQ’s annual post-election seasonality tells an interesting story. April (+6.29%), October (+4.98%), and November (+6.15%) lead the charge, marking the year’s strongest months by average return. While early weakness in February (-4.56%) and a September dip (-2.65%) often set the stage for pivotal reversals before momentum builds into year-end strength. Will we see similar in 2025?
XLC (Communication Services Sector)
The QQQ lead the major indices in yearly performance with a 30.2% return, outpacing the SPY and IWM. Communication Services (XLC) is the top-performing sector, up 35.9%, driven by strong performances from Meta Platforms, Alphabet, and Netflix. In contrast, Energy (XLE), led by Exxon Mobil and Chevron, and Materials (XLB), driven by Linde and Sherwin-Williams, are the only sectors down year-over-year, reflecting an interesting market divide.
Believe it or not, this is just a fraction of what happened in the markets this week. For a full run down delivered straight to your inbox every weekend, sign up for The Official Trendspider Newsletter!
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