Why the stock market may not see a Santa rally this year
When Santa Claus hitches up Rudolph for his annual Christmas route this year, he may well skip Wall Street, not because stocks have been naughty but because they’ve been so good.
At least that is the bold forecast among some analysts who believe the market has gone too far too fast.
“My experience is that the market seems to hurt the most number of people that it can so if the consensus is that there is a big rally, there probably won’t be one,” said Ian Winer, director of equity trading at Wedbush Securities. “I think we’ve already seen the Santa rally.”
Santa rally is a reference to the stock market’s surge toward the end of year that typically takes place around Christmas. Predicting that the rally will be a no-show is a gutsy move given that all the pieces seem to be falling into place for the stock market.
Sentiment is bullish, confidence in the economy is improving and earnings are showing signs of bouncing back. The consensus, in fact, points to further gains for equities.
Yet, fears that the market is likely to stumble once it comes off its postelection adrenaline rush persist given the magnitude of the gains since the U.S. election. All three major indexes this week touched all-time highs with the Dow Jones Industrial Average DJIA, -0.04% coming within striking distance of the key 20,000 milestone.
See also: What Dow 20,000 means for stock-market investors
Katie Stockton, chief technical strategist at BTIG, believes that stocks are showing signs of exhaustion. “We would look for a significant pullback to unfold next week as short-term overbought conditions take their toll,” she said in a note.
Still, even though investors may miss…
Comments