Santa is Warming up the Kringle 3000 for a Christmas Rally

• Posted by Greg Harmon
• on December 22nd, 2015

Every year my family watches a bunch of Christmas themed movies and shows to get and keep us in the spirit of the holiday. This year we started with my daughter’s favorite, Holiday Inn and then moved on to my son’s favorite Elf. Watching Elf got me thinking about the Santa Claus Rally that many have been waiting for in the market. It seems there are many parallels in real life with the movie.

The drag from falling oil and high yield prices has stalled the market like the general lack of Christmas spirit. Santa’s sleigh needs this to fly. Many market pundits and traders are talking about a Christmas rally but is anyone really participating? Mouthing the words is very different from acting them out and living them.

Sure the late December move in interest rates by the FOMC, make Janet Yellen fit well with the character Walter Hobbs played by James Caan. He is a children’s book publisher hard at work right up until Christmas Eve. But then he changes his demeanor and starts to catch the Christmas spirit. As Santa’s sleigh is trying to take off from a crash landing in Central Park it struggles without much Christmas spirit.

It takes the full 180 degree turn in character from Hobbs to raise the Claus-o-meter to full Christmas spirit and power the Kringle 3000, lifting Santa’s sleigh.  With only 3 trading days until Christmas, is it time for all market participants to get into the Christmas spirit and lift the market? Perhaps. There are some signs in the charts.

The chart of the S&P 500 ETF ($SPY) is showing signs of bottoming on a short term timeframe. making its first higher high since December 17th. Crude oil is showing signs of life as well with a bounce off of $35. Even High Yield ($HYG) is seeing the start of a positive momentum divergence on short term charts. Certainly a first higher high or positive divergence does not guarantee a Christmas rally.

But just like in Elf, the growth of Christmas spirit started with Jove singing alone before everyone else joined in. “The best way to spread Christmas cheer is singing loud for all to hear.” I will be the first to start singing today on a move over 203 in the SPY.

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Still time before Christmas. Contact me at greg@dragonflycap.com and use the code SANTA in the message to get either an annual subscription for $556 (10% off) or an annual subscription plus my book signed for $600.

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