“Twas just nine days to Christmas, when all through the Fed there was not a worry in the economy, so they said.
With Wall Street complacent and investors without a care, they all waited patiently for a rate hike, just a quarter point seems fair.
Declines in Junk bonds, Transports, Imports, Exports…who cares. There is FaceBook, Amazon, NetFlix and Google in the air.
From Wall Street To Main Street came the call, it’s time to ‘buy, buy, buy’ one and all. We have lots of positions to sell you, after all.
With hopes set high by one and all, the question is now will ‘Santa come to visit Broad and Wall?’”
As Christmas fast approaches, the hopes of a year-end “Santa Rally” fills the airwaves. Just this morning Jeff Saut,the “raging bull” from Raymond James announced that “investors should get ready for a ‘rip your face off-type rally.’”
As I have discussed at the beginning of November:
“With the markets currently oversold on a very short-term basis, the current probability is a rally into the ‘Thanksgiving’ holiday next week and potentially into the first week of December. As opposed to my rudimentary projections, the push higher will likely be a ‘choppy’ advance rather than a straight line.
In early December, I would expect the markets to once again pull back from an overbought condition as mutual funds distribute capital gains, dividends, and interest for the year. Such a pullback would once again reset the market for the traditional ‘Santa Claus’ rally as fund managers ‘window dress’ portfolios for their end-of-year reporting.”
Here is the updated version of that chart which shows the markets playing out very closely to that previous projection.
However, while the seasonal tendencies suggest that the markets will push higher through the end of the year, there is no guarantee that such will be the case. However, the recent sell-off, as noted in the chart above, did push markets back into enough of a short-term oversold condition to facilitate a fairly healthy bounce.
