"If Santa fails to call, the bears will roam on Broad and Wall" . . . An old stock market axiom
"If Santa fails to call, the bears will roam on Broad and Wall" is an old stock market axiom that has stood the test of time. According to Investopedia:
A Santa Claus rally is a surge in the price of stocks that often occurs in the last week of December through the first two trading days in January. There are numerous explanations for the Santa Claus rally phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.
We thought the Santa rally was going to begin late last week, but that just didn't happen. Therefore, investors will be watching the stock market this week to see if the Santa rally develops. If it doesn't, it will be a red flag going into the new year. We, however, will not be watching for the Santa rally, or the January barometer, but rather the December low indicator as it was explained to us by our departed friend Lucien Hooper.
It was back in the early 1970s, when I was working on Wall Street that I encountered Lucien. At that time Lucien, then in his 70s, was considered one of the savviest "players" in this business. While known for many market axioms and insights, the one that stuck with me was Lucien's "December low indicator."
It seems like only yesterday we were sitting at Harry's at the Amex Bar & Grill having lunch when he explained it. "Jeff," he began, "Forget all the noise you hear about the January barometer; pay much more attention to the December low. That would be the lowest closing price for the Dow Jones during the month of December. If that low is violated during the first quarter of the New Year, watch out!" And while the month is not over, the print low for December, at least so far, came on December 1 at 23,921.90; so, be advised. This morning all is quiet on the western front . . .
Jeffrey D. Saut is chief investment strategist at Raymond James.