Santa Claus Rally

RSR readings of a month may not the best tool to predict an end of the year rally also called as Santa Claus Rally, but they definitely tell us how sustainable any rally is, going ahead into 2011. The rolling 6 month sentiment  remains overextended and topping. This tells us that any bounce backs should remain weak going into 2011. This puts any Jan first week rally doubtful.

Markets have an ability to trash general beliefs. One of the belief was that year ending in 10 are negative. The whole year has come to the 10% upside on Dow Jones and BET. Whether markets end the year negative or not remains just simply statistics. Such small changes throughout the year makes it a stagnant 2010 and not a positive or negative year.

What did the year teach us? It teaches us that just like buying into sentiment low in Mar 2009 was an opportunity, it was the Jun-July RSR sentiment readings low in 2010. It also tells us that extending 6 monthly sentiment does not make an accumulate case just yet.

Markets will always test patience. They will always fall asleep tricking you into doing the same. They will always move faster than you when they trend. Understanding market means time efficiency. If you don’t understand time, you may always be running in a labyrinth you can not solve.

Enjoy the latest Sentiment Review.