Santa Claus Rally Is an Indicator, Not a Strategy
And so far, he isn’t coming to town this year
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Our View
Sorry Traders & Faders, but Santa doesn’t seem to be coming to town this year.
It has not been a good stretch of trading and it remains the case that each rally is being sold. Yesterday’s Opening Print was a long one. I want to keep today’s short and sweet, because the volume is so low and the market can really do anything in a two-day stretch during a big rebalance.
As my good friend Jeff Hirsch of the Trader’s Almanac says:
Remember Santa Claus Rally is an indicator not a Trading Strategy. To wit Yale’s famous line: “If Santa Claus Should Fail To Call, Bears May Come To Broad And Wall.” (Stock Trader’s Almanac 2023 p 118).
Our Lean — Danny’s Take
The ES rallies on Globex, sells off before the regular session, and then fails.This pattern showed up not long after the tax selling started. And guess what? The ES is rallying on Globex again today.
I can't say the ES is going up or down in the last 2 trading sessions of 2023, but what I can say is that it’s the same type of selling that has been hitting the index market everyday for the last several weeks.
The ES has fallen in 2 straight days, 3 of the last 4, and is now working on its fourth straight weekly decline. It has not been able to muster up a few short-covering rallies and bounces, but they all fizzle out as the buyers completely lack any meaningful strength right now.
I am not going to make any end-of-the-year calls for 2022. What I will say is the overall price action is weak but “continues to hang around 3835” — remember that level and its relevance with the JPMorgan collar.
Will the ES just stay there? Well it has so far, but if the NQ keeps going down, the ES will go for the ride. Keep track of the rotations too.
Our lean: