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?
Jeff Greenblatt @jeffgreenblatt
There is always a Santa rally except in the years where there is a confirmed bear market. The closer we get to Christmas the more likely there is to be a rally. This year has been a little different given the big time cycles which validated late, but what is likely to happen is more lasting highs in late Nov/December that won't be recognized until later when the market drops for real next year.
Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Image Credit: sis
Dan Gramza
I do believe there is a potential for a positive move in the stock market during the week between Christmas and New Year’s Day. Not only do you have the tax considerations, which are done to lessen portfolio tax impact and windowdressing, which means that some funds will purchase popular stocks to show they have these holdings in their portfolio before year end but there is also the potential for the psychological market support to create this type of price action.
We have plenty of potential bearish information floating in the market such as the financial condition of some countries economies such as Russia, Venezuela, China, etc. The clues to the psychological market support is how the market absorbs the reality and the perception of this information. In other words, look for indications of the market breaking to lower prices on bearish news but rallying to higher prices before the close. This would indicate a positive attitude as we go into year end and provides the possibility of carrying over into January.
Dan Gramza is President of Gramza Capital Management Inc. and DMG Advisors, LLC. He provides daily market updates from around the globe on subjects ranging from the Nasdaq and currencies to crude oil and grains.
Image Credit: glynlowe
Matt Weller @MWellerFX
I’ve have grown increasingly skeptical of the stock market rally as the year has worn on, primarily due to weakening internals, including bearish sector rotation, receding breadth, and a growing number of technical divergences, not to mention the elevated valuations. Historically, the “Santa Claus” rally in late December and “January Effect” at the beginning of the year have been among the more reliable calendar effects, and for that reason they are critically important.
If stocks fail to rally during this historically bullish period, it would serve as a big warning that stocks are vulnerable to a deeper retracement heading into 2015, and even modest gains during this period would not alleviate some of the longer-term concerns about the equity market.
Matt Weller is the Senior Technical Analyst for FOREX.com. He contributes regular updates on various currencies and commodities throughout the day.
Image Credit: the d34n
Carl Larry @oiloutlooks
I am not an equity guy, but I think that OPEC put one too many barrels in Santa’s sleigh and he’s not going to be able to make it to the Big Board this year.
Carl Larry is the president of Oil Outlooks and Opinions LLC. He provides daily oil market guesstimates with a dose of pop culture.
Image Credit: eraphernalia_vintage
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