Santa Claus is Coming to Market

December 22, 2016 4:21AM CST

Food for thought as we prepare our strategies for 2017. The Santa Claus rally is specific to a seven day window from the last five days of the year plus the first two of the new year. It is actually used as an indicator for the year to come. The Stock Trader’s Almanac conveys, “since 1950 the S&P 500 has averaged 1.5% gains for that seven day period”. It may not look like much, but it has been significant enough to catch the attention of traders. Jeff Hirsch editor and chief of The Stock Trader’s Almanac has a fun jingle... ”if Santa Claus should fail to call, bears may come to Broad and Wall.”

If the end results on January 3rd are negative, it may not bode well for the year to come. If you don’t catch the rally, or if Santa Claus doesn’t come to call, you can use this indicator to set up your trades for the new year. Add this to a new strategy that has come to light, ”buy the election - sell the inauguration”.

Best wishes & good trading.

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