A Santa Claus rally is a calendar effect that involves a rise in stock prices during the last 5 trading days in December and the first 2 trading days in the following January. This would begin this friday the 23rd and end Jan 4th.
If you believe that stocks are in for a big hit in 2023, if you had to pick a period of time to let it all off so to speak, you need lots of liquidity. We had a nice amount of liquidity over 400 to sell into, but the market gave all that up without hardly any pushback. With a “santa clause” rally though I can sell to you leading into it (people will buy in front of any perceived rally) and since I’m not actually there to buy anymore, you’ll only get lower prices during this period.
If anything a santa clause rally seems to be the least likely outcome because if all the rich people really think 2023 is bad, why buy anything in front of it? Days like today coerce investors into being bullish, but as the market goes higher, put prices become more reasonable and shorting can make more money. Put call ratios are only bearish during the santa clause rally and appear suddenly bullish the day its over.
https://www.barchart.com/etfs-funds/quotes/SPY/put-call-ratios
What do you think? Santa dropping you some green bars or red steaming hot lumps of coal this year?
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