The Stock Trader's Almanac

[Stock]

Santa Claus Is Back In Town

December 31, 2008

Ho Ho Ho! It looks like Santa Claus is back in town – New York City that is and he is cruising down Wall Street. So far the first four days of our seven-day Santa Claus Rally (SCR) the S&P 500 has racked up a 3.2% gain and at midday New Year's Eve the S&P is up another 1%.

Over the years we have documented the bullish tendency for the market to rally over this short yearend/New Year period. When it fails to materialize it is usually a sign of trouble ahead for the market. This inspired Yale Hirsch to coin the phrase that if "Santa Claus Should Fail To Call, Bears May Come to Broad & Wall."

That was exactly the case the last three times Santa delivered coal to Wall Street. In 1999-2000 the SCR was down -4.0% and then the Tech Bubble popped. The 2000-2001 Bear Market drove the DJIA down -29.7%, S&P -36.8%, NASDAQ -71.8%. In 2004-2005 the SCR was down -1.8% and 2005 was the first down “fifth” year since 1875. 2005 was a flat weak year with the narrowest Dow range on record. In 2007-2008 SCR was down -2.5% and we had the fifth worst Bear Market on record.

There are still two and a half days left on the SCR, but the positive market action to date is encouraging. If the market can go up in these usually bullish times from November through January it shows underlying strength and support. If it cannot that would be a sign of weakness. A continuation of the resumption of these seasonal bullish trends as we have already seen around Thanksgiving and now at the end of December supports our bullish forecast for 2009 in our January 2009 issue.

Posted by Stock Trader's Almanac Blog at 8:41 AM 0 comments

http://stocktradersblog.blogspot.com/