Will Santa Claus Rally Deliver?


Simpler Trading Team

2 min read

Is the stock market’s Christmas in jeopardy?

Will the Santa Claus Rally materialize?

The sustained uptick is expected annually the last week of December through the first couple of trading days in the New Year.

But this has been a year of one unexpected economic storm after another. The market has struggled this week leading into Christmas, leaving the final week of the year as anyone’s guess.

Add in back-to-back shortened trading weeks to end the year, new pandemic lockdowns, questions about vaccine effectiveness, Congress’ perceived weak stimulus package, and news of a potentially devastating cyber attack across private and government operations… and 2020-weary traders are still facing a very stormy stock market.

Whether the Santa Claus Rally delivers or not, Simpler’s traders continue to focus on bright spots in the market that reveal strong potential for gains.

Market signals continue to lean bullish despite recent pullbacks (all three indexes were erratic today). Squeezes are building in sectors and tickers across time frames, so the Santa Claus Rally may still make an appearance. 

Don’t expect any classic setups of buying a big dip and riding off into the sunset with huge profits to close the year. Prudent plays, caution days, and setups that don’t involve extending risk are key to protecting capital as the New Year rolls around.

Still, while the stock market may not deliver any surprising Christmas miracles, we’ll keep watching out for last-minute gifts in 2021.

We Saw: Erratic stock market after big news, mixed reviews – 

  • Dow slides and doesn’t recover to the positive like Monday
  • Nasdaq up on the day, S&P 500 down slightly
  • Stimulus package holds little promise for restaurants

We’re Watching: Sticking to basics, looking for directional moves –

  • Killing losing trades, waiting on next opportunity
  • Setups where the squeeze is strong and risk low