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Sunday, December 15, 2013

Will the Real Santa Claus Rally Please Stand Up

One of the strongest seasonal rallies is called the Santa Claus Rally, although there seems to be a great deal of confusion about exactly when it's supposed to happen. The original formulation of the seasonal by Yale Hirsch of the Stock Trader's Almanac has the year-ending rally starting on the first trading day after Xmas and ending on the second trading day of January. Some claim the rally starts before Xmas. So, who's right?

Actually, when we look at seasonals, there is a tendency for the SPX to form a bottom on the 20th of December, then rally into the 22nd. At that time, the market tends to correct into the 26th of December, then rally into the 29th. The latter is the real Santa Claus Rally.