Stock Market Update For The Week Ahead: Santa Claus Rally?

The Last Week In A Nutshell

What Happened: Prior to the holiday weekend, on tapering volumes, U.S. index futures balanced.

Remember This: “Equity strength at this time of the year is widely known as the Santa Claus Rally, but the term is somewhat misunderstood,” researchers said in one LPL Financial blog.

“Discovered in 1972 by Yale Hirsch, creator of the Stock Trader’s Almanac (carried on now by his son Jeff Hirsch), the real Santa Claus Rally is the final five trading days of the year and first two trading days of the following year, not just December. In other words, the official Santa Claus Rally is set to begin Thursday, Dec. 24.”

Pictured: Profile overlays on a 30-minute candlestick chart of the Micro E-mini S&P 500 Futures

Technical

Though risks remain, markets are pricing in the odds of a continued rebound. Unless some exogenous event were to transpire, technically speaking, all broad-market indices are in an uptrend.

For next week, two go/no-go levels exist; S&P 500 trade that finds increased involvement above $3,691.00 and below $3,667.75 would suggest a change in conviction. Anything in between favors responsive trade.

Key Events

• Wednesday: MBA Mortgage Applications, Goods Trade Balance, Pending Home Sales, EIA Cushing Crude Oil Stocks Change, EIA Distillate Stocks Change.
• Thursday: Initial and Continuing Jobless Claims.

Recent News

• U.S. bankruptcies surpassed 600 as 2020 coronavirus-era filings climb.
• How U.S. fiscal stimulus could benefit the pending economic recovery.
• Gray swans: Blinded by COVID-19, investors may be ignoring 2021 risks.
• Dr. Anthony Fauci suggests the worst is still to come in the pandemic.
• The European Union has kicked off its COVID-19 vaccine campaign.
• Santa Claus rally threatened by COVID resurgence, Georgia elections.

Key Metrics

• Sentiment: 43.6% Bullish, 34.4% Neutral, 22.0% Bearish as of 12/23/2020.
• Gamma Exposure: (Trending Neutral) 3,491,944,085 as of 12/24/2020.
• Dark Pool Index: (Trending Higher) 44.1% as of 12/24/2020.