Trader Talk

Jingle Bells Are Ringing For a Santa Claus Rally


If Santa Claus should fail to call, then bears may come to Broad and Wall...the period for the Santa Claus rally starts tomorrow, and so far it is setting up beautifully: stocks are in a slow, gentle, low-volume drift upward.

The Santa Claus rally is traditionally a modest rally that occurs in the last five trading days of December and the first two trading days of January.

Since 1950, it has been good for an average gain of 1.4 percent in the S&P 500 (Stock Trader's Almanac).

Santa Claus or not, you have to be encouraged by the trading action in December.

Consider that:

1) the S&P 500 is up 2.3 percent, despite a big rally in the Dollar Index (up 4 percent). Though gold stocks have suffered on the dollar rally, other commodity stocks are barely off their highs from a month ago.

2) while tech has remained the market leader, other sectors have rotated into market leadership in the past month, most notably healthcare, which has rallied as the healthcare bill has been diluted. Other, smaller leadership groups have emerged as well, notably Real Estate Investment Trusts (REITs) and airlines.

3) financials have been the notable laggard. Traders have been selling them since November to finance purchase of other sectors.



Questions?  Comments?