30 years of history points to year-end rally

A torrent of selling sent the Dow back into the red for 2015 and had all the major indexes facing their biggest one-day percentage loss in over a month. But according to one technician's chart work, history shows investors would be wise to start buying stocks now.

"Our key takeaway is to stay long the S&P 500," Ari Wald said Monday on CNBC's "Trading Nation." For Wald, a combination of strong technicals and positive seasonal data make the case for a year-end rally.

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Looking at a chart of the S&P 500 in 2015 compared with the average monthly returns from 1984 to 2014, Wald noted a pattern of deterioration heading into Thanksgiving. "We've followed this road map closely, and typically what you see is early November weakness followed by late-November strength that extends into year-end," Oppenheimer's chief market technician said.


According to Wald, the markets could continue to wobble for the next couple of sessions, but inevitably end the year at or above all-time highs. Since 2013, the S&P 500 has rallied a respective 5 and 2 percent in the last two months of the year.

"I don't think we're going to have a massive move up in a broad-base way," David Seaburg argued. "I think it's going to be a very concentrated group of names that are going to continue to work out," he said Monday.

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If an investor wants to buy an index, Seaburg advised looking to the small cap Russell 2000 rather than the S&P 500. "If you want to bet on the market, the best bet is the Russell 2000," Cowen & Co.'s head of sales trading said. "It's underperforming the S&P 500 and it's filled with names that hedge fund managers will push around."

The Russell 2000 is down more 1.5 percent this year, while the S&P 500 is up 1 percent.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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