Today is the start of what is supposed to be the Santa Claus Rally. According to the Traders' Almanac, the S&P 500 index has gained an average of 1.7% since 1969 over the final five trading days in December and the first two of January.
There is more. If the rally does not occur, it is supposed to be a signal that a bad year ahead.
These seasonal tendencies in the market often have some basis in calendar-based positioning and tax trades, but also are often simply a strong self-fulfilling prophesy. The Santa Claus effect is fairly strong and given the light volume likely in the days ahead, traders anticipating such a rally may well cause it.
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