“Market Trends & Insights: January Outlook”

We are currently in a strong seasonal period leading into January. Combined with the anticipated Santa Claus rally, we should see market strength continue into the new year. This market euphoria is evident with the VIX Volatility Index dropping below 14, indicating a high level of investor complacency.

However, as we move into January, we will be on the lookout for a potential market top, possibly coinciding with Trump’s inauguration. This could be a classic ‘Buy the Rumor, Sell the News’ scenario, where the market has already priced in all the pro-business policies Trump has promised. As his inauguration approaches, the market might sell off.

The chart below highlights a technical trend we are closely monitoring. We have drawn a yellow trend line from October ’23 to today. Up until August this year, every time the S&P 500 tested this trend line, it held (green arrows), and the market moved higher. However, since August, this trend line has acted as resistance, and each time the S&P 500 tested it, the index turned back down (red arrows).

We will keep a close eye on this trend line as we move into January, as it could trigger a correction if the S&P 500 is unable to break through.

Stay tuned!