Foodies may still be savoring Thanksgiving leftovers, but market pros have been squarely focused on Christmas and the potential of a Santa Claus Rally.
Although purists will argue the term Santa Claus rally should be limited to the stock market gains that can occur between Christmas and New Year’s day, the Fast Money gang and many other pros take a broader view.
They use the term Santa Claus rally to describe a march higher across the entire month of December, with investor sentiment buoyed by intangible catalysts, such as the good cheer that prevails during the season.
And investors can’t help but wonder if Monday’s market action was a sign that a 2011 Santa Claus rally was about to get underway.
By all accounts the stock market gains were impressive. The Dow surged by triple digits and all 10 sectors of the S&P closed sharply higher.
But that’s not to say the Grinch didn't have his eye on this market too.
“There’s been no confirmation from the bond market,” reminds the skeptical Guy Adami. In other words, if investor appetite for riskier assets such as stocks was increasing, yields in Treasurys should also start to climb as money rotates out of the bond market.
And that didn’t happen. How should you interpret Monday’s action? Should you position for a big end of year rally? Or should you take profits while you still can?
Trader Tim Seymour is relatively hopeful. “I think we’re at the beginning of an allocation,” he says. Historically the last couple days of November into the first week of December is a time when capital is re-allocated into stocks.
And he says fundamentals could support market gains. Late reports suggested that Europe is getting more aggressive in their attempts to contain the overseas financial crisis.
Trader Joe Terranova is cautiously bullish but adds that he’s needs confirmation before he can hit the buy button.
Terranova reminds the desk that very powerful catalysts are coming later this week in the form Europe PMIs and the US jobs report. “We need to get through the entire week to see if the momentum has really shifted,” he says. Then form your thesis.
Trader Guy Adami is skeptical. “I think the risk / reward is to the downside,” he says. Adami calls Monday’s gains nothing more than a classic short covering rally. “I’d sell into any rally,” he says.
According to technical analyst John Roque, the charts agree with Adami. Roque says, “The market has unresolved action to the downside. I’d remain underweight and sell into rallies. (In case you're wondering Roque tells us the S&P could trade as low as 950.)
What do you think? We want to know!
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Trader disclosure: On Nov 28, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova; Long: VRTS, LQD, MUB, AXP, LULU, DECK, SBUX, CAT, CSCO, CAT, HES, EMC, IBM, SU; Adami: Long: NUE, MSFT, BTY, AGU, C, GS; Seymour: Long: AAPL, BAC, INTC; Finerman; Long AAPL & short calls, Long BAC, JPM-long stocks and leap options, YHOO-long stock short calls, IBM-long stock short calls; Short: SPY, IWM, MDY, SPY; Nations; long SPY, AMZN Call spreads, long volatility (by being long options but no VIX futures or options positions); Weiss: Long EUO, QCOM, NFLX Puts, HPQ, DE, MDRX
For Ken Sena
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For John Roque
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