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Dow Futures December 2022 Outlook

By:Ryan Sullivan

How has the Dow traded in December 2022? 

Dow Futures are currently trading at 33,052, down 9% from its opening price of 2022. December price action has shown us that there is resistance around the 34,300 level. The last three days of trading in Dow Futures has been bearish, retreating away from resistance.  

The current price of Dow Futures is up 15.11% from the low of 2022. Price action since October has been very bullish. It wasn’t until this month that bears were able to start to regain some control. 

Right now, the current price sits in the middle of a trading range between 32,539 and 33,357. This range has been traded heavily this year and price tends to hang in this range for a noticeable period of time before moving on. We will find out over the next week if that tendency will continue. 


dow futures price chart year to date
Fig. 1: /YM price chart starting from January 1st, 2021. 

How will the Dow trade for the rest of 2022? 

The channel line that we broke through in early November will now become support. If that holds true, the next big support level below our current price is around 32,350. I think that it is likely that we will get down to this level in the near term.  

If price does get down to that support level, buyers and sellers will battle to see if the support will hold or if price will continue lower.  

Volatility has retreated heavily over the last eight weeks of trading. A down move from here with velocity will bring volatility back into the market. 

Another price action scenario that I might be likely over the next 7 to 14 days of trading is, price quickly dipping down from its current price to check buyer support, and then a spike to the upside, returning to the 35,000 price level.  

What’s moving the market? 

You could say that the Federal Reserve increasing by 50 basis points now, and not 75 basis points, is positive news and the market is reacting positively. However, the market prices in that information almost immediately and positions itself at a price where it thinks fair value is, prior to any announcement. 

It seems to me that the last eight weeks of rallying has been due to a positive outlook by investors, despite inflation and recession fears. 

Santa Rallyis a term thrown around by traders and investors to describe bullishness in the market that seems to happen every Christmas season. The reality is that there is no statistical significance surrounding bullishness during this time of year. Some years it will work as expected, other years it will not. It is much more random than we’d like to acknowledge. 

What does happen this time of year, every year, is fewer trading days in December because of the Federal holiday schedule. The theory is that market makers, fund managers, and big market participants in general, tend to take time off from work during this time of the year. The thought then is that if the big players are not trading, there will be less violent price action movement and, as a result, less volatility. However, the reality is that this time of year does not correlate to decreasing volatility in any significant way. 

Stick to your strategy and tune out the noise. Look at volatility for yourself and put positions on that make sense to you regardless of the time of year. Stick to your mechanics year-round. 

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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