Official Santa Claus Rally Starts Tomorrow!
It is not a trading strategy; it is an indicator. To wit: “If Santa Claus should fail to call, bears may come to Broad and Wall.” Yesterday’s selloff was a great setup. Just what the Santa Claus Rally needed. The Street has been buzzing about the Santa Claus Rally for three months now. Most still get it wrong. It’s not the yearend rally, the Q4 rally that runs from Halloween through January. Yes, November, December and January are the best three months of the year, but they are not the Santa Claus Rally.
Santa Claus Rally was devised by Yale Hirsch in 1972 and published in the 1973 Stock Trader’s Almanac. The “Santa Claus Rally” is the last 5 trading days of the year plus the first 2 of New Year. This year it begins on the open on December 22 and lasts until the second trading day of 2024, January 3. Average S&P 500 gains over this seven trading-day range since 1969 are a respectable 1.3%.
It is not a trading strategy; it is an indicator. Failure to have a Santa Claus Rally tends to precede bear markets or times when stocks could be purchased at lower prices later in the year. Down SCRs were followed by flat years in 1994, 2005 and 2015, two nasty bear markets in 2000 and 2008 and a mild bear that ended in February 2016.
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As Yale Hirsch’s now famous line states, “If Santa Claus should fail to call, bears may come to Broad and Wall.”
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