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Historical Trends Suggest A Strengthening Bullish Trend In December – Chris Vermeulen

I received many messages and emails asking my opinions related to the recent market volatility and sideways trending in the US markets. Many traders see the recent downward price trend as a warning of a potential shift in trends. Yet, I see it as normal November volatility in price and wanted to share some data to support my conclusions.

Even though I’m not dismissing some external event, like a sudden US Fed move or some foreign market event, historically, the US markets enter a reasonably strong Christmas/Santa rally phase at this time every year. The increasing volatility usually starts to build in September/October – reaching a peak in October/November every year. December’s trends are traditionally much more muted and consolidated.

The NASDAQ continues to trend in a narrowing price channel created by the COVID and post-COVID rotation/rally. Recently, we’ve seen the biggest volatility breakdown in price take place last August/September. Once October started, the NASDAQ began another rally phase that carried into November.

As November comes to a close, I expect a moderate rally to continue melting price higher that will likely carry into December 2021.

Historical Price Data Paints A Very Clear Picture For Traders

I’ve pulled together some data using my proprietary price modeling and data mining utility to illustrate these trends more clearly. I’ve pulled data from the QQQ and the SPY to help readers understand what to expect as we move closer to closing out 2021.

Overall, November is usually a moderately volatile month in the markets. I’m providing data from a proprietary data mining tool I use that helps me understand historical volatility and price trends throughout various months and seasons. Allow me to explain this data so you can learn to pull more subtle inferences from it – as I do.

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First, the Largest Monthly POS/NEG (Positive/Negative) ranges show us volatility ranges and general price trending capabilities. The span between the POS and NEG values reflects volatility for any given month. For that month, the strength, or Trend Bias, should be evident by looking for the largest POS or largest NEG value.

Second, the Total Monthly POS/NEG values reflect how data was distributed and the associated volatility related to each side of price trends. Larger POS ranges show greater volatility to the upside. Larger NEG ranges show greater volatility to the downside. Additionally, pay attention to the distribution across the total number of months for each POS or NEG Monthly Totals. These show how dominant trending is or is not.

Last, the Total Monthly Sum values provide some general guidance regarding the strength of trending and momentum likely within each month. Total Sum values that are larger than the POS/NEG values indicate stronger momentum trends within each monthly period.

I’ve broken this data into QQQ and SPY blocks to see how the data differs between these two US major indexes.

QQQ Historical Price Data Mining Results

The QQQ data consists of 23 years of monthly historical data. Allow me to try to share my analysis of this data with you.

QQQ Monthly Market Historical Data
  ===[ September ]===================================   
– Largest Monthly POS : 5.61 NEG -21.99   
– Total Monthly NEG : -78.53 across 12 bars – Avg = -6.54   
– Total Monthly POS : 21.69 across 11 bars – Avg = 1.97  
——————————————–   
– Total Monthly Sum : -56.84 across 23 bars  
Analysis for the month = 9
===[ October ]=====================================   
– Largest Monthly POS : 28.15 NEG -15.96   
– Total Monthly NEG : -44.66 across 8 bars – Avg = -5.58   
– Total Monthly POS : 94.16 across 15 bars – Avg = 6.28  
——————————————–   
– Total Monthly Sum : 49.49 across 23 bars  
Analysis for the month = 10
===[ November ]====================================   
– Largest Monthly POS : 30.24 NEG -18.71   
– Total Monthly NEG : -28.313 across 6 bars – Avg = -4.72   
– Total Monthly POS : 86.374 across 17 bars – Avg = 5.08  
——————————————–   
– Total Monthly Sum : 58.06 across 23 bars   Analysis for the month = 11
===[ December ]====================================   
– Largest Monthly POS : 17.37 NEG -15.11   
– Total Monthly NEG : -31.75 across 11 bars – Avg = -2.89   
– Total Monthly POS : 49.88 across 11 bars – Avg = 4.53  
——————————————–   
– Total Monthly Sum : 18.12 across 22 bars   Analysis for the month = 12 ===============================================

SPY Historical Data Mining Results

The SPY data consists of 29 years of monthly historical data. Let’s take a look at how the SPY compares to the QQQ…

Overall, the Total Monthly Sum shows December usually closes higher, though. Continuing the Christmas Rally into the end of the year is very common for the US markets. December’s Total Monthly bars show 19 POS and 9 NEG – showing very strong bullish trending potential.

SPY Monthly Market Historical Data
  ===[ September ]===================================   
– Largest Monthly POS : 8.81 NEG -22.42   
– Total Monthly NEG : -104.85 across 14 bars – Avg = -7.49   
– Total Monthly POS : 51.75 across 15 bars – Avg = 3.45  
——————————————–   
– Total Monthly Sum : -53.09 across 29 bars  
Analysis for the month = 9
===[ October ]=====================================   
– Largest Monthly POS : 30.11 NEG -20.09   
– Total Monthly NEG : -62.06 across 10 bars – Avg = -6.21   
– Total Monthly POS : 130.11 across 19 bars – Avg = 6.85  
——————————————–   
– Total Monthly Sum : 68.05 across 29 bars  
Analysis for the month = 10
====[ November ]===================================   
– Largest Monthly POS : 35.51 NEG -10.67   
– Total Monthly NEG : -26.30 across 6 bars – Avg = -4.38   
– Total Monthly POS : 140.83 across 23 bars – Avg = 6.12  
——————————————–   
– Total Monthly Sum : 114.52 across 29 bars  
Analysis for the month = 11
===[ December ]====================================   
– Largest Monthly POS : 11.81 NEG -25.72   
– Total Monthly NEG : -44.60 across 9 bars – Avg = -4.96   
– Total Monthly POS : 63.82 across 19 bars – Avg = 3.36  
——————————————–   
– Total Monthly Sum : 19.21 across 28 bars   Analysis for the month = 12 ===============================================  

December’s Santa Rally Should Become Evident Within 5 to 10 Days

December 2021 should see a solid melt-up in trending unless something happens to disrupt these general historical trends. I expect the markets to settle into early December and to start trending higher in a moderate “melt-up” type of trend – likely moving in (+/-) 0.3% to 1.3% daily ranges. Meaning the QQQ and SPY may rally between 3.5% to 5.5% higher before the end of 2021 if my estimates are accurate.

Traders should start to see a solid price rally form in the QQQ and SPY over the next 5 to 10 trading days. My expectations are a reasonably early start to bullish prices trending in early December. The NASDAQ could target $17,000 or higher, while the SPY may target $495 to $500 before the end of 2021.

The strongest sectors are likely to be Technology, Consumer Staples, Retail, Real Estate, and Financials.

This rally may carry into, and possibly through, January 2021 and beyond. Stay ahead of these significant trends by following our research.

Near the end of December, I’ll publish a follow-up article to this one highlighting what to expect in January, February, and March 2022. Stay tuned for more data mining research and guidance.

Want to Learn More About Historical Trends and POS/NEG Ranges?

Follow my research and learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

Kindly take a minute to learn about my Total ETF Portfolio (TEP) and how it can help you identify and trade better sector setups. My team and I have built these strategies to help us identify the strongest and best trade setups in any market sector. Every day, we deliver these setups to our subscribers along with the TEP ETF sectors system trades. You owe it yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

Have a great day!

Chris Vermeulen
Chief Market Strategist

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