Santa Claus Rings in 2010

At the close of business on December 31, 2009, with the major indices under snow for the last five days of the year, the Santa Claus Rally (SCR) was nowhere in sight. As defined in the Stock Trader’s Almanac, the SCR is the propensity for the S&P to rally the last five trading days of December and the first two of January an average of 1.5% since 1950.


The lack of a rally has often been a preliminary indicator of tough times to come. This was the case most recently in 2008 and 2000. However, the first day of trading in 2010 was up strong and put SCR into the black. The S&P tacked on a few more points today, putting the SCR near the historical average at 1.4% for 2009-2010.


There have been several instances in which a positive SCR preceded bad years or markets, so some caution is in order. But this is an early indication that the current bull market still has some legs and lends support to our 2010 Annual Forecast in the recent January 2010 issue for further gains before any sizeable pullback later in 2010. We’ll want to see positive performance for the First Five Days of January and the full-month January Barometer.

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