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Is Stock Surge Early Sign of Santa Claus Rally?

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
1. Evercore or an affiliate has acted as a manager or co-manager of a public offering of securities by this subject company in the last 12 months.
2. Evercore or an affiliate beneficially owns 1% or more of common equity securities of this subject company.
3. Evercore or an affiliate has a client relationship with, or has received compensation from this subject company for investment banking services in the last 12 months.
4. Evercore or an affiliate expects to receive or intends to seek compensation for investment banking services from this subject company within the next three months.
5. Evercore or an affiliate has a client relationship with, or has received compensation for non-investment banking, securities-related services from this subject company in the last 12 months.
6. Evercore or an affiliate has a client relationship with or received compensation from this subject company for non-securities services in the last 12 months.
7. The analyst(s) received compensation from this subject company in the last 12 months.
8. The analyst(s) or a member of his or her household has a financial interest in the securities of this subject company (this may include, September 28, 2011 without limitation, whether it consists of any option, right, warrant, future, long or short position).
9. The analyst(s) or a member of his or her household serves as an officer, director or advisory board member of this subject company.
10. The analyst or Evercore has an actual, material conflict of interest with this subject company.
11. An employee, director or consultant of Evercore Partners Inc. or one of its affiliates (but not a research analyst or a member of a research analyst's household) is a director of the subject company.

For John Roque
No disclosures

For Robert Sinche
RBS Head of FX Strategy
Firm is market maker is Euro currency and Canadian dollar

For John Stephenson
First Asset Investment Management
Has Positions in Gold, G, FCX, HAL, BHI, RIG




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