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Historical Trends Suggest A Strengthening Bullish Trend In December

By Chris VermeulenStock MarketsNov 26, 2021 11:01AM ET
www.investing.com/analysis/historical-trends-suggest-a-strengthening-bullish-trend-in-december-200609651
Historical Trends Suggest A Strengthening Bullish Trend In December
By Chris Vermeulen   |  Nov 26, 2021 11:01AM ET
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I received many messages and emails asking my opinions related to the recent market volatility and sideways trending in the U.S. 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 U.S. Fed move or some foreign market event, historically, the U.S. 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.

NASDAQ Trending In Narrowing Upward Price Channel

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.

NASDAQ Futures Weekly Chart.
NASDAQ Futures Weekly Chart.

Historical Price Data Paints A Very Clear Picture For Traders

I've pulled together some data using my proprietary price modelling and data mining utility to illustrate these trends more clearly. I've pulled data from the Invesco QQQ Trust (NASDAQ:QQQ) and the SPDR® S&P 500 (NYSE: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.

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.

  • September is generally quite volatile with a predominance of downward price trending overall. In fact, the considerable total monthly sum value shows September can show strong downside price trends closing out the month. September showed 12 NEG months and 11 POS months, so September is basically 50/50 in terms of trend direction – leaning slightly heavier towards downward trending.
  • October reflects even bigger volatility and usually closes higher to represent a moderate recovery from September. October's total monthly bars show 15 POS and 8 NEG – showing solid bullish trending potential.
  • November shows the biggest historical volatility and usually closes moderately higher overall. This is usually when the Christmas rally begins – where traders expect strong end-of-year bullish trending. November's total monthly bars show 17 POS and 6 NEG – showing very strong bullish trending potential.
  • December reflects more mild volatility with continued bullish trending. The POS/NEG values range is much smaller than October and November – yet still larger than September. The smaller total sum value suggests trending is a bit more muted on average but still generally bullish. December's total monthly bars show 11 POS and 1 NEG – showing another 50/50 trending potential, leaning slightly bullish.

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

  • September is generally moderately volatile with a predominance of downward price trending overall. The large total monthly sum value shows September can reflect strong downside price trends closing out the month. September showed 15 NEG months and 14 POS months, so September is basically 50/50 in terms of trend direction – leaning slightly heavier towards downward trending.
  • October volatility increases more than 40% compared to September for the SPY. The SPY usually recovers almost all of the September losses in October. Notice the range of the POS/NEG values in October reflect a more consistent range than the total monthly sum in comparison to September or November? This suggests that October usually presents a stronger momentum trend – usually closing higher for October. October's total monthly bars show 19 POS and 10 NEG – showing very strong bullish trending potential.
  • November shows strong historical volatility, almost on-par with October, and usually closes strongly higher overall. The 114.52 total monthly Ssum suggests the SPY can really "take off" in November at times. Also, the lower value shown in the NEG value suggests downside price pressure is minimized in November. October's total monthly bars show 23 POS and 6 NEG – showing extremely strong bullish trending potential.
  • December clearly illustrates a general slowdown in momentum for the SPY. The POS and NEG values range is much smaller than the October/November ranges, and the bias between these numbers is NEGATIVE. That suggests that downside price volatility may be a bit stronger in December – prompting some moderate downside price trends.

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 U.S. 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.

NASDAQ Futures Monthly Chart.
NASDAQ Futures Monthly Chart.

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.

Historical Trends Suggest A Strengthening Bullish Trend In December
 

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Historical Trends Suggest A Strengthening Bullish Trend In December

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Comments (21)
Gervais Christopher
Gervais Christopher Nov 28, 2021 6:34PM ET
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i think "January 2021" was about 11months ago...heh...
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Nov 27, 2021 7:51PM ET
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Trends suggest back to where Biden started off
Stephane Adam
Stephane Adam Nov 27, 2021 7:28PM ET
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Financial markets are bumpy places in the mathematical sense of the term, the variability of the distribution of data is therefore infinite and a series can be interrupted at any time. December 2018 did not respect the law of seasonality and it is quite possible that it will be the same in December 2021.
Hesham Elmasry
Hesham Elmasry Nov 27, 2021 1:24PM ET
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Thanks a lot, very interesting and valuable information.
Shailine Lorrange
Shailine Lorrange Nov 27, 2021 1:04PM ET
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Did you take in consideration the new covid variant and how it might influence these nnumvers?
ZS Beck
ZS Beck Nov 27, 2021 1:04PM ET
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The new covid variant is less severe symptoms than Delta. Read the South African Doctors association. It's just creating another fear to get people to get vaccinated.
Tony Huynh
Tony Huynh Nov 27, 2021 12:25PM ET
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1 red day and bears go, "Bull Market is Death, 10 years bear market starting now"
Shane Zhang
Shane Zhang Nov 27, 2021 12:25PM ET
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maybe when sp500 reaches 6k then 10 plus year begin
Alex Malmstrom
Alex Malmstrom Nov 27, 2021 10:03AM ET
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I kind of lost track halfway into this article. It sounds interesting but please try to keep it concise and fewer data next time.
NYSE NASDAQ
NYSE NASDAQ Nov 27, 2021 8:28AM ET
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simple thing show us your alpha if you have any.
cromeoraine crane
cromeoraine crane Nov 27, 2021 8:03AM ET
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lol, december gonna be bloodbath actually
Thomas Saporito
Thomas Saporito Nov 27, 2021 7:07AM ET
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The BULL MARKET IS DEAD - as the S&P500 will drop down to the 1,950 level over the next few months resulting a 25-year BEAR MARKET AND SEVERE DEPRESSION. The US Dollar will lose is status as the world reserve currency. Bread lines will be everywhere. The COVID VIRUS will NEVER go away but continue to mutate and infections will spread cos vaccinations are useless! Stock up of vital food supplies and needs and buy a gun to protect yourself and your family for the dark days ahead for the world!
Edward Chong
Edward Chong Nov 27, 2021 7:07AM ET
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Haha u need to see a doctor now.
Barani Krishnan
Barani Krishnan Nov 27, 2021 7:07AM ET
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Most sane reply to that insanity.
Thomas Saporito
Thomas Saporito Nov 27, 2021 7:04AM ET
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The S&P500 will visit the 1,950 level over the next couple of months. The BULL MARKET IS DEAD! Prepare for an extensive 25-year BEAR MARKET AND DEPRESSION!
Shane Zhang
Shane Zhang Nov 27, 2021 7:04AM ET
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dont know about 5p500 go to that level but one thing is both stock and usd can fall together, as before both asset class move opposite, this time it will change
Chris Poulos
Chris Poulos Nov 27, 2021 4:23AM ET
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ha ha! ... good one, chris!
Chris Johnson
Chris Johnson Nov 27, 2021 3:20AM ET
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And were the previous December bullruns also from an ATH in the middle of a pandemic? And with rates close to zero while the inflation is running very hot... I guess not
Kamlesh Jha
Kamlesh Jha Nov 27, 2021 12:58AM ET
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I believe investing. com should stop publishing his article
Kamlesh Jha
Kamlesh Jha Nov 27, 2021 12:56AM ET
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he has been bearish all along when the market was bullish and now when the market is going to be bearish he has become bullish
Edward Chong
Edward Chong Nov 27, 2021 12:56AM ET
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haha
Kamlesh Jha
Kamlesh Jha Nov 27, 2021 12:53AM ET
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this guy always provide crap data, if u want to make money always do the opposite to what he says.
Kevin Avila
Kevin Avila Nov 26, 2021 11:43PM ET
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I guess he just left out important fundamental calculations out? i.e. tapering and interest rate hikes
William Bailey
William Bailey Nov 26, 2021 9:27PM ET
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BUllish printer the Fed has will use the virus excuse again to print to billionairess again….
Sabi Sab
SabiSab Nov 26, 2021 8:47PM ET
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LOL!  We've been waiting for that 4800 blowoff top for a very long time.  The blowoff top happened the day of Powell's reappointment and he just pretended it's not there!  WTH!  Christmas doesn't always mean rally.  It didn't happen in 2018.
Yiannis Tsoutsoukis
Yiannis Tsoutsoukis Nov 26, 2021 7:57PM ET
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One of the best and most complete analysis on https://investing.com so far. Nice evaluation and strict to the point!
Ri Wa
Ri Wa Nov 26, 2021 7:57PM ET
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this adviser is often good if you do the opposite.
Cesaro Pelucci
Cesaro Pelucci Nov 26, 2021 11:41AM ET
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Always countertrade this guy, you'll be a millionaire in no time.
lo re
lo re Nov 26, 2021 11:41AM ET
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People who are great  with markets forecasts are making money by investing, not by writing articles so we can't expect miracles from people who are wring here or on other similar web sites
 
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