LIVE MARKETS-While Santa seems like a stretch, January still offers hope

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WHILE SANTA SEEMS LIKE A STRETCH, JANUARY STILL OFFERS HOPE

Many kids are lucky enough to find stockings filled with treats on Dec. 25 each year but equity investors have to wait a bit longer to confirm whether or not Santa pays them a visit.

More often than not, the so-called Santa Claus rally brings an advance for the S&P 500 over the last five trading days of the year and the first two days of the new year, according to the Stock Trader's Almanac authors, who identified the trend and coined the phrase in the early 1970's.

And the market did better the following year when the Santa rally occurred, according to the Almanac crew.

But while it was up 1% on Friday, the S&P 500 had lost ground in the most recent five sessions to end Thursday roughly 1.8% below its Dec. 23rd close.

So if Santa is to arrive this year, he's really procrastinated and left a lot of work to do for the remainder of Friday's session, the final deadline for turning that sleigh around.

However, if the Santa rally doesn't materialize by the end of the day, "it is not the end of the world or the bull market either," according to a research note from the Almanac researchers who also cite the magic of the January Trifecta.

The January Trifecta is made up of three indicators - the Santa Claus Rally (SCR), the First Five Days (FFD) and the full-month January Barometer (JB).

Since 1950, when all three indicators were positive, the S&P 500 rose that year 90.6% of the time, as in 29 out of the 32 years, with an average gain of 17.7%.

But when one or more of the Trifecta was down, the year was still up 59.5% of the time, or 25 of 42 years, but with a much smaller average gain of 2.9%.

"Sure, the market does better in years with a positive SCR," they wrote, "But the full-month January Barometer holds the key."

This is because, when the SCR didn't happen but the month of January was up, regardless of what happened in the first five trading days of the year, the S&P 500 rose 6 of 7 years since 1950 with an average full year gain of 18.2%.

And they note that 1994, the one down year out of the six, lead to just a small decline of 1.5% for the year.

So while Santa does make things better, the whole year isn't resting on his shoulders alone.

(Sinéad Carew)

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