We were wrong. It was not grandma that was killed by the reindeer in the Christmas classic by Randy Brooks. It was Santa!
Mr. Claus would never have let his herd of traders hanging by hopium for the last four days as they fervently subscribed to tradition. The Stock Market Almanac I’m sure mentions this long-held belief that after Santa finishes his rounds filling up on cookies and milk, disbursing a trillion items (mostly for Amazon) that he saunters down Wall Street pumping up stock prices. Not unlike Janet Yellen et al but you get the idea.
As I write, Santa has exactly sixty minutes to pump up a lot of stocks.
Wall Street always has a response. After 4:00pm ET, Wall Street will bring out the right response: What? No Santa Claus rally. The January Effect is coming. The January Effect is coming.
According to the Stock Trader’s Almanac, the January Effect is a trend where small-cap stocks tend to outperform large-cap stocks from mid-December through the first few months of the new year.
Tax-loss selling, which often appears at the end of a year, marks the low of the worst-performing small-cap stocks. As expectations rise, they are set for better price action, at least short-term.
It is now after 4:00pm ET. Santa is on life support if you accept that this so-called rally actually extends into the first two trading days of January.
Santa… can you hear me?