'Santa rally' hopes shatter on S&P 500 selloff

Bulls dreaming of a "Santa Claus rally" in the benchmark S&P 500 inxed saw their hopes shattered Friday with another sell-off taking the index down to crucial support at around 2,632. Support at this level is clear on an intraday chart like the one-hour chart below; the S&P 500 has dipped a few points below a few times but it has always jumped back.

Within the last hour of trading Friday, the S&P 500 managed to scramble just above this point to close at 2,633. A daily close below this area, however, could fuel a new sell-off and bulls will most likely have to forget about Santa coming around this year.

Renewed selling would most likely take the Index down to around 2,550. If – and it's a big 'if' – Santa changes his mind and comes around, do not expect many presents. Any rally at this point would likely not exceed a bounce back to 2,800 at best, where there seems to be strong resistance.

The Relative Strength Index is bearish, having been rejected at the 60 threshold; it has also broken its rising trendline.