A Santa Claus rally is often used roughly to refer to any stock rally in late December, but it is defined by the Stock Traders Almanac, which first identified the phenomenon, as a rise in stock prices during the last five days of the trading year and the first two days of the new one.
The almanac notes that this has happened in all but 10 years since 1969. It's significance is not just as a overused catch phrase for journalists: It has frequently been a good predictor of the market's performance in January and the year ahead. As the almanac has put it, "If Santa Claus should fail to call, bears may come to Broad and Wall."
This year, the market is off to a good start. Last Friday was the first day of the Santa rally period. The Standard & Poor's 500 index rose 0.9% and entered positive territory for the year.
This morning, stocks have wobbled, with the Dow Jones industrial average and the S&P 500 trading almost unchanged as investors process news that home prices were down in the latest Standard & Poor's/Case-Shiller report, while consumer confidence is up.
The markets' performance this week is likely to determine whether the S&P 500 ends the year in positive or negative territory for the year. Despite all the violent market movement this year, the index is likely to show the smallest yearly change since 1970, according to Bloomberg.
With stock trading expected to be light this week, much attention will likely be focused on the obligatory year-ahead predictions. To get started, here's one look at what the optimists are saying, and one from a commentator who is waiting for the Apocalypse.
-- Nathaniel Popper in New York
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