With Turkey shooting down a Russian warplane on Tuesday morning, Jim Cramer thinks there is more than enough noise to contend with in this market. Especially considering what is happening in France and Belgium, investors are concerned that the market may not be able to rally this holiday season.
“Put it all together, and this environment can feel pretty darned daunting … but at times like these, I think it is worth taking a step back and seeing what we can learn from the technicals,” the “Mad Money” host said.
That is why Cramer turned to Carley Garner, a technician and commodities expert who co-founded DeCarley Trading and a colleague of Cramer’s at RealMoney.com.
Garner said that despite all of the noise, this is a time of year when the equity markets always seem to find a floor of support. So while most investors expect a Santa Claus rally, Garner thinks — after looking at historical data — this could be more of a Thanksgiving rally.
“Or maybe just like every retailer in America, the stock market is just celebrating Christmas earlier and earlier each year,” Cramer said.
Historically, most stocks start to trend higher into the holiday season, starting in mid-to-late November, regardless of what is happening. Even during the financial crisis of 2008, Garner found that the S&P 500managed to stop the selling during the holidays and achieved a 200 point rally from late November into early January.
So if it could work back then, why would this year be any different?
Garner took a look at the seasonal chart of the S&P 500, and found that there tends to be a big dip in October, followed by a strong bullish move into the New Year. This pattern has repeated itself year in and year out, to the point where Garner thinks it would be downright silly to try to buck this powerful seasonal trend.
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More importantly, Garner found that the Wednesday before Thanksgiving and the Friday afterwards — Black Friday — tend to produce fantastic gains in the market. Of the past 62 years, there were only 13 years that those two sessions produced a combined loss.
As for the holidays, Garner added that if investors bought the S&P 500 on Dec. 17 and held it through Jan. 3; they would have made money for the last 14 of 15 years.
Garner believes that the S&P will continue to climb until it tests its early November highs around 2,109, which is very close to where it closed on Tuesday. If it can break above 2,109, Garner expects it to roar up to 2,150 — or even 2,180.
If Garner turns out to be wrong, she thinks the S&P could pull back down to its floor of support around 2,040 or even 2,000 if the Fedmeeting throws a wrench into everything.
Ultimately the charts suggested to Garner that the S&P 500 could be ready to roar going into the holiday season, which aligns nicely with the historical data.
“Hey, I’ll take it, and a happy Thanksgiving to all,” Cramer said.