Will the Santa Claus Rally materialize this year? By Investing.com

By Investing.com Staff

With stocks lagging ahead of the Christmas holiday, traders are asking “has Santa died.”

This is in reference to the well-known “Santa Claus Rally”, which according to Wall Street legend puts a bid under stocks around the holiday season.

According to stock tracking whizzes at Stock Traders Almanac, the Santa Claus Rally will begin on the open on December 23 and end with the close of trading on January 4.

Normally, the posts an average gain of 1.3% during this period, the Almanac states.

However, there is a not-so-rosy downside if Santa fills stock traders’ stockings with coal instead of cash.

“The failure of stocks to rally during this time has tended to precede bear markets or times when stocks could be purchased at lower prices later in the New Year,” the Almanac states.

The ‘Santa Claus Rally’ will be followed by the Almanac’s First Five Days “Early Warning” System, starting on January 9. The Almanac states: “In pre-election years this indicator has a respectable record. In the last 18 pre-election years 13 full years followed the direction of the First Five Days. The full-month January Barometer has an even better record in pre-election years with 15 of the last 18 full years following January’s direction.”

Lastly, the flagship indicator, the January Barometer created by Yale Hirsch in 1972, simply states that as the S&P goes in January so goes the year, the Almanac highlights.

“The long-term record has been solid, an 83.3% accuracy rate, with 12 major errors since 1950,” the Almanac notes related to the January Barometer.