The so-called Santa Claus rally while cliche has been a pretty consistent phenomena over the years. Perhaps it is more about the practice of window dressing—the habit of fund managers to load up on stocks that made profitable moves that year so they can say we had X in our portfolio—than yuletide euphoria. The truth of the matter is a Santa Claus rally can kick in any time after Thanksgiving. Traditionally, we do get a rally in December unless the markets truly are in a bear phase. This year analysts have been questioning whether the Santa Rally would happen because equities had already climbed to all-tim highs prior to Thanksgiving. Perhaps Santa came early.
And with the markets way overbought and expectations of a Santa Claus rally, equities were prime for a correction, which came with a vengeance. From Dec. 5 through Dec. 16 the Dow lost more than 900 points, putting a big steaming pile of coal in many portfolios. But just as late Christmas shoppers can find bargains, so can traders looking for a Santa Claus rally after a significant correction. With the Dow's jump of 420 point yesterday—the biggest gain since 2011—it now appears we may be getting a Santa rally after all--albeit late. The Dow gained more than 700 points in two days a week Christmas.
Merry Christmas to all and to all a good trade!
We asked traders, is there still room for a Santa Claus rally this December, or did Santa just fill our equity stockings with coal?