Bull Talk: Ryan Detrick Tells Benzinga Why Investors Have A Reason To Believe In Santa

Carson Group’s Ryan Detrick believes in Santa, and the chief market strategist gave investors a reason to have faith in the historic Santa Claus rally (SCR) on Benzinga’s "PreMarket Prep."

Tuesday's extended PreMarket Prep broadcast included: New Age Wealth Advisors founder Todd Gordon, Loup Ventures Managing Partner Gene Munster, Wedbush Securities Equity Analyst Michael Pachter, and Piper Sandler Managing Director and Chief Market Technician Craig Johnson.

First, for the uninitiated, the SCR takes place in the final five trading days of the year, beginning on Dec. 23.

The SCR is a seasonally bullish dynamic during which investors can expect an average of 1.33% move in the benchmark S&P 500 SPY between the last five days of December, and the first two trading days in January.

Historically, according to Detrick, during those final five trading days of the year, the SPY has (79.2% of the time) returned an average of 1.33%. As of right now, the SCR is proving correct, as the index has moved 0.82% higher since the market opened on Dec. 23.

Read also: 'Soft Landing': Why Goldman Sachs Says The US Is More Likely To Avoid 2023 Recession

Detrick observed data stretching back to the 1950s and concluded that "there isn’t a single seven-day combo out of the full year that is more likely to be higher than the 79.2% of the time higher we’ve seen previously during the Santa Claus rally."

These final days are up an average of 1.33%, which is the second-best seven-day combo of the year.

Is there a cause for the rally? 

Generally, there's no clear explanation for the phenomenon, however, the rally is sometimes attributed to the following: 

• Lighter volume due to holiday vacations makes it easier to move the market higher

• Increased Investor purchases in anticipation of the January effect

• A slowdown in tax-loss harvesting that depresses prices at the beginning of December

“The bottom line is that bulls tend to believe in Santa.” Detrick said.
Data going back to the 1990s shows that there have only been six times when the SCR didn’t deliver.
January was lower five of those six times, with all five years showing little growth.
“Considering the bear market of 2000 and 2008, both took place after one of the rare instances that Santa failed to show, makes believers out of us. Should this seasonally strong period miss the mark, it could be a warning sign,” explained Detrick. 

Now Read: Santa Claus Rally: What It Is And Odds Of Happening During Bear Market

Photo: Courtesy of Shutterstock.