Santa Claus Rally: Ya Gotta Believe

 | Dec 27, 2016 | 4:33 PM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:










To paraphrase a famous editorial published in the New York Sun in 1897:

"Yes, Virginia, there is a Santa Claus rally. It exists as certainly as program trading and mark-ups and you know that they abound and give to your trading its highest challenges and greatest joy. Alas! How dreary would be the world if there were no Santa Clause rally. It would be as dreary as if there were no little traders. There would be no joy, no poetry, no breakouts to make tolerable this existence."

The action today was a classic example of a Santa Claus rally. The indices were not impressive at all but breadth was very strong as it approached nearly 2-to-1 positive. It was a day for action in small-caps. Around 450 names hit new 12-month highs and movers like Conatus Pharma (CNAT) , Cemtrex (CETX) , Northern Dynasty (NAK) , ENGlobal (ENG) and Nvidia (NVDA) delivered some nice gains to the speculative traders who focused on the micro rather than the macro.

To a great degree, the Santa Claus rally exists because we believe it exists, but that works just as well as anything else. The key now is to make sure we aren't caught by surprise if there is a swing in the last couple of days of trading. In the past two years, the indices sold off about 1.5% in the last two days of the year and set the stage for ugly action to start the New Year.

There isn't any reason to believe this pattern will repeat for a third year, but it is a reminder that anything can happen as we wind up the year. Much of what drives this action at this point is quite different from other times. Stay vigilant and be ready to move quickly. Santa Claus doesn't stick around for long.

Have a good evening. I'll see you tomorrow.

Columnist Conversations

In GS I see key price support at the 224.49-226.42 area.  I also have timing for a possible low.  I ...
Tesla (TSLA) has tested our long-term bounce zone @ 283.90-258.95 a few times. These have been BUYING opportun...
We have a big winner here, let's roll it up to a higher strike   SOLD SRPT NOV 140 CALL AT 26 (in ...
We still like this name and want to give it more time. SOLD AAPL OCT 220 CALL AT 6.9 (in at 10) BOUGHT A...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.