A measured approach is warranted.
How I would plan this week’s trade
This is typically a positioning and risk-management week, not an aggressive deployment window.
Light net exposure: Maintain partial longs rather than full conviction trades. Liquidity thins quickly into year-end and price moves can exaggerate without confirmation.
Favour leaders, not laggards: If participating, I would focus on stocks and indices already holding above key moving averages. Chasing beaten-down names rarely pays during Santa windows.
Options bias: Call spreads or short-dated directional structures are preferable to outright equity exposure. Defined risk matters when liquidity is uneven.
Cash is a position: Holding dry powder into the final two sessions of December often offers better risk-reward than forcing trades early.
Am I bullish on the Santa rally?
Cautiously, yes. Confidently, no.
The Santa rally works best when:
Markets are not over-levered.
Volatility is compressing.
There is no imminent macro shock.
Those conditions are partially present. Seasonality is supportive, but breadth remains selective and leadership is narrow. This suggests upside may be grindy rather than explosive.
My base case:
Modest upside bias for indices.
Stronger performance in large-cap quality and defensives with growth optionality.
Any rally should be treated as tactical, not a signal of a fresh multi-month leg higher.
In short, I would participate selectively, protect downside tightly, and avoid mistaking seasonal strength for structural confirmation.
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