foxex: Historic Santa Claus Rally!

Wednesday, December 26, 2018

Historic Santa Claus Rally!

The Market Sum | INVESTOPEDIA

Insight after the bell

By Caleb Silver, Editor in Chief

Dow
22,878.45 +4.98%

S&P
2,467.70 +4.96%

Nasdaq
6,554.35 +5.84%

VIX
30.41 -15.69%

INV Anxiety Index
103.17 High Anxiety

US 10-Yr Yield
2.797 +1.75%

Historic Santa Claus Rally!

Santa Claus left a little something under the tree at the New York Stock Exchange. OK... it wasn't so little. Stocks rallied to a historic one day gain, erasing Monday's selloff and most of last week's losses. The DJIA posted its biggest one day point gain in history and its best performance on the day after Christmas. It was a highly volatile session of trading as markets started strong out of the gate with a triple digit gain, then promptly sank over 200 points. But there must've been something special for lunch today because the buying started around noon and didn't stop until the final bell.

All major markets, including oil, posted massive gains.

DJIA: UP 1086 points or +4.98%

S&P 500: UP 116 points or +4.96%

Nasdaq: UP 361 points or +5.84%

Russell 2000: UP 61 points or +4.8%

Crude Oil: UP $4.42/barrel or +10.2%

Why it Matters:

There was no obvious catalyst behind today's rally. The government remains in partial shutdown. The Fed was quiet, as was the President who was traveling to Iraq. A member of Trump's economic team did say that FOMC Chairman Powell's job is 100 percent safe, but who knows if that is true. There were very few corporate announcements of note as most people are off for the week. Amazon (AMZN) reported its best holiday shopping season ever, but we expected that, right?

What's Next:

It wasn't as if economic and investing climate suddenly shifted over Christmas. It didn't. There were simply more buyers than sellers today. We may have crossed a trend line or resistance point when the indexes sold off earlier in the morning that prompted some big institutions to buy. They won't tell us until they want to. Since stocks have been under such pressure over the past several months, it's also possible that many investors were shorting the markets in anticipation of future declines. Once those short positions were 'in the money', those investors covered their positions and started buying again. That's all speculation, but it is the kind of thing you see in market environments like this one.

Still, the broad enthusiasm across all asset classes, including the beaten down FAANG stocks, was noteworthy. We've seen 2-3% rallies over the past couple of months, but most of those were quickly sold off by the close of the following day. We'll have to see if this rally has staying power and can establish a base for future gains. Nothing has changed since Christmas Eve, except your portfolio's performance with just two more trading days in the year. Stay alert, but feel free to enjoy leftover's and a glass of something bubbly to celebrate today's historic rally.

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