Merry Christmas….. What we have to do on Santa Claus Rally
Merry Christmas to all of you. In couple of days, we will leaves 2009 year and enter 2010. On christmas, we usually spend our time with our family to fill it with joy and happiness together. This christmas, i can’t spend my time with my parents because of my busy schedule of activites. So sad…..
Let’s back to my topic. If you don’t what about the topic is, it still about investing & trading. What i want to tell now is about Santa Claus Rally. Santa Claus Rally believed as one of most consistent seasonal pattern in a year. A Santa Claus rally is a rise in stock prices in the month of December, generally seen over the final week of trading prior to the new year. The rally is generally attributed to anticipation of the January effect, an injection of additional funds into the market, and to additional trades which must, for accounting and tax reasons, be completed by the end of the year. The Santa Claus rally is also known as the “December Effect.”
This pattern so consistent before 2000. But after Nasdaq bubble burst happen, seems there is a change on the pattern. Let’s see the last 5 year of Santa Claus Rally
2008
1 Dec – 31 Dec : Bullish
25 Dec – 31 Dec : Bullish
2007
1 Dec – 31 Dec : Flat
25 Dec – 31 Dec : Bullish
2006
1 Dec – 31 Dec : Bullish
25 Dec – 31 Dec : Bullish
2005
1 Dec – 31 Dec : Flat
25 Dec – 31 Dec : Bearish
2004
1 Dec – 31 Dec : Bullish
25 Dec – 31 Dec : Bullish
Based on the pattern above, we can see that so risky if we bet to trade between 25 December until 1 January. The better result we can achieve is to bet on deep correction in November and place a bull spread option position in the beginning of December months
