Chartology: Santa Claus Rally

Lots of investors are hoping that St. Nick has enough magic up his red velvet sleeve to give them the perfect gift – a Santa Claus rally.

What’s a Santa Claus rally you ask? It’s an affectionate term given to the usual rise in stock prices during the month of December. Often times the rally happens over the final week of trading prior to the New Year.

The gains are generally attributed to anticipation of new money coming into the market in January, and to additional trades which must, for accounting and tax reasons, be completed by the end of the year.

But this year has been anything but usual. Will the holiday season really be the most wonderful time of year for investors? Or are we getting nuthin’ for Christmas!

For insights we turn to John Roque, Natixis Bleichroeder technical analyst.

Santa Claus Rally?

Roque thinks that Santa may be on his way. He likes that the market has ignored a lot of bad news lately which he thinks is a plus.

And he’s seeing a move down in the number of new lows. He says, “when you go back in time, if you get a big spike (in lows) like we had in October and then fewer new lows -- it usually sets up for a market rally."

How reliable is Roque’s analysis? “The drop of the number of new lows is about as good an indicator as there is,” he tells us.

Other Analysis

Gold: Roque tells us despite the recent slide lower, he thinks the longterm trend for gold is up.

Cephalon: Roque says trends in thethis chart suggest the stock is making a base. He has a ‘09 target of $100.

Dollar Tree: Roque tells us the stock is currently trading above its upward sloping 200-day moving average. “I wouldn’t be surprised if there’s a 15% higher target in 2008.”

For John Roque's complete technical analysis please watch the video above.

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Trader disclosure: On Dec. 19th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seygem Asset Management Owns (EEM): Seymour Owns (AAPL), (BAC), (F), (MER), (DXO): Karabell Owns (AAPL), (GLD), (GOOG), (JPM), (UYG); Pete Najarian Owns (UYG)

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (OFC), (DLR), (EXR), (IGE), (MAC), (DBC), (DBV), (SKT), (UA), (CLB); Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights

Natixis Bleichroeder And/Or Affiliates Make An Over-The Counter Market In (CEPH)

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