Commentary: Paul Ebeling on Wall Street


Conditions setting up for the Santa Claus Rally

A year after the US stock market plunged on the Fed’s acts, many investors believe conditions are set for a rally to finish off Y 2019.

A more accommodative Fed compared with a year ago is an important argument for investors who are confident the market is unlikely to see a repeat of 2018’s dive.

Another change from a year ago: Stock markets globally are more synchronized in their strong performance.

A wild card for markets heading into year-end is the United States’ trade dispute with China. The dispute remains unresolved, but there is optimism about a preliminary US-China trade agreement that could also lift stocks into the New Year.

Stock indexes around the world have joined US stock averages in recent weeks in setting new highs. So far this year, Europe’s Stoxx 600 is up about 19% and recently hit its highest mark in more than 4 years.

At this time last year, the S&P 500 was up about 1% YTD (now S&P 500 +24.1% YTD), but the European index was down about 9%.

With stock performance at the very end of the year, there is often more at stake than just feeling good around the Holidays.

The last 5 trading days of the year and the 1st 2 of the new year comprise the traditional Santa Claus rally, according to the “Stock Trader’s Almanac.”

In Y 2018, the market bounced back after its 24 December resulting in an overall gainer of 1.3% for those 7 trading sessions – right irn line with the historical average, based on the almanac’s data going back to Y 1950.

But any absence of a Santa Claus rally may augur rough times for the market in the months ahead.

“Santa’s failure to show tends to precede bear markets, or times stocks could be purchased later in the year at much lower prices,” the almanac says.

Note: The longer gold stays in a tight trading range, the greater the chances of a volatile breakout. The direction will be determined by the outcome of the trade deal.

Remember, always take what the market gives, it is your money so your responsibility, be prepared.

Have a terrific Holiday week.

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