In the Dow Jones Industrial Average (DJIA) and S&P 500, near-term resistance exists within bullish price channels, as negative A/D Line divergences are resolved. The bulls remain in control, but we are watching for signs that the post-election market action signals the beginning of a transition to a choppier 2025. Large-, mid-, and small-cap proxies didn’t come close to filling the upside gap created by the election results, nor did they break below their recent topside breakout ranges and levels. I view this as supportive (bullish) in the near term. It also suggests that the recent low serves as the first level of short-term support.
DJIA and S&P 500 (daily bars). Short-term resistance is still in place. When coupled with high levels of “Excessive Optimism”, bouts of profit-taking shouldn’t be surprising. Mind the gaps.
Have equities brought forward the historically bullish returns of the fourth quarter following elections? Are we at risk of such an occurrence? While I still believe there will be instances of profit-taking as we approach year-end, I consider seasonal charts to be secondary; they are not as significant as primary indicators and models.
The Dow Industrials' Four-Year Presidential Cycle suggests a choppy start to 2025, with weakness in the latter part of the first presidential year extending into the second year—an outlook that has not been widely discussed on Wall Street.
The bull market typically continues into the first year after an election, but the first two years tend to be rocky. Many bear markets begin in the first year and persist into the midterm election year, as seen with the bear market that started in 2021 and continued into 2022. Therefore, looking ahead, prudence suggests adopting an investment strategy that objectively manages risk.
The typical December Seasonal Pattern starts off dull and pops mid-month.
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