What Can Traders Expect in December?

Nasdaq 100 Price Outlook:

Nasdaq 100 Forecast: What Can Traders Expect in December?

The Nasdaq 100 closed November more than 11% higher for the month after surging in the aftermath of the US Presidential election and on the discovery of a potential coronavirus vaccine. The two themes took turns dominating headlines throughout November, while hopes of returning to a pre-covid world sparked some sector-specific rotations. The rotation away from hot work-from-home stocks into more traditional businesses helped the Dow Jones and Russell 2000 outpace the Nasdaq 100 for the month – an infrequent occurrence to be sure.

Nasdaq 100 Price Chart: 4 – Hour Time Frame (August 2020 – November 2020)

Nasdaq 100 price chart

Nevertheless, the Nasdaq 100 remains well positioned as markets enter the twilight of 2020. Stimulus hopes and potential deadlock in Washington that would make the most progressive policies of Biden’s agenda difficult to pass have taken up the torch for bulls and the Federal Reserve looks to remain steadfast in their accommodative stance.

S&P 500 Seasonality

S&P 500 price chart and vix

Source: Bloomberg, John Kicklighter

Together, it can be argued possible tailwinds are present in the equity market headed into December and 2021, but the white-hot rally of November may give rise to more pensive price action before a continuation higher can unfold.Further still, the resolution of the US election has seen volatility deflate – exacerbated by the seasonal drawdown in volatility generally seen in November and December.

Stock Market Holiday Calendar 2020/21: Global Shares Market

Thus, further gains might lack the breakneck speed that was displayed last month and there are potential headwinds on the horizon.That being said, temporary consolidation might prove healthy in the longer-term as past price action is tested and gaps are shored up.

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily 18% -2% 6%
Weekly -8% 1% -3%

Regardless of direction, it seems seasonality might contribute to a pullback in volatility that might see price move more cautiously in December compared to what was observed in September, October and November. In the meantime, follow @PeterHanksFXon Twitter for updates and analysis.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFXt

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like