Home > Stocks, Trading > Merry Christmas….. What we have to do on Santa Claus Rally

Merry Christmas….. What we have to do on Santa Claus Rally

December 26th, 2009 Leave a comment Go to comments

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…..

santa-claus-arrived

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

2008

1 Dec – 31 Dec : Bullish

25 Dec – 31 Dec : Bullish

2007

2007

1 Dec – 31 Dec : Flat

25 Dec – 31 Dec : Bullish


2006

2006

1 Dec – 31 Dec : Bullish

25 Dec – 31 Dec : Bullish


2005

2005

1 Dec – 31 Dec : Flat

25 Dec – 31 Dec : Bearish


2004

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

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