- Will The Santa Claus Rally Continue?

Market Summary
In our last report, we mentioned that there has been large divergence between the number of issues on the NYSE Composite Index that have created new highs and the number that has been making new lows. Generally, traders don't expect to see a large number of new highs and lows occur simultaneously because it suggests that market participants are losing conviction and that they are unsure of the future direction.

We also noted that recent breadth numbers have been above 2.2%, which will likely to be used as an early indication of a valid Hindenburg omen - an indicator used to predict market corrections. As you can see from the charts below, the bearish signal has not lead to a move lower yet, but we believe that it is still a major red flag.

We'll wait a few more weeks to see if the momentum started by the Santa Claus rally will be able to carry over into the new year. For now we believe it is a good idea to remain on the sidelines.