“Stock Trader’s Almanac explored why end-of-year trading has a directional tendency. The Santa Claus indicator is pretty simple. It looks at market performance over a seven day trading period - the last five trading days of the current trading year and the first two trading days of the New Year. The stats are compelling.
‘The stock market has risen 1.3% on average during the 7 trading days in question since both 1950 and 1969. Over the 7 trading days in question, stock prices have historically risen 76% of the time, which is far more than the average performance over a 7-day period.
The statistics are very compelling. As Ryan Detrick noted this week:
Here Comes Santa Claus
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To wit:
“That target was derived when I previously set out several ‘risk/reward ranges.’
‘With the markets closing just at all-time highs, we can only guess where the next market peak will be. Therefore, to gauge risk and reward ranges, we have set targets at 3500, 3750, and 4000.’
I have updated the chart below. The “black arrow was where I initially did the analysis.
With the markets currently
“knocking on the door, we will likely reach that target by year-end. Such is particularly the case with the seasonal
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