Setting Up Ready, Rested After Santa Rally

As traders wait with visions of a Santa Claus Rally, there is much to watch out for in the next few days.

The jolly man rally traditionally kicks off Dec. 24 and today looked promising that the market boost may arrive on time. All three major indexes were up through the day before slipping into the close.

The Dow closed at 30,129.83 points to rise .38% (gaining 114.32 points on the day). The Nasdaq dropped to 12,771.11 points for a .29% slip while the S&P 500 added .07% to 3,689.98 points.

Veteran traders point out that trading during the Santa Claus Rally requires due diligence, especially with Christmas week only 3 ½ days (remember: markets close at noon on Christmas Eve, Thursday) and New Year’s Day week only four days of market sessions.

All the “window dressing” surrounding this annual special event can divert attention from digging into what the market, sectors, and specific tickers have done in the weeks prior. Simpler’s traders are watching which assets have dropped or surged in the last 60 days while checking twice how the market direction might shift into the first of the year.

January is historically a caution zone for traders riding the holiday rally and then getting dumped unceremoniously.

Simpler’s traders aren’t shorting the market, but may follow bearish moves in the short term. For a longer outlook, they’re studying the likely high volatility into January and February with potential for profitable setups.

For the Santa Claus Rally, our traders are exercising patience and sticking with strong, steady plays to the long side. No need to overtrade any run up as the goal is to maintain staying power and take advantage of New Year opportunities.

As we’ve said, 2021 looks to be another wild ride, so it makes sense to be rested and ready with a plan to get into the mix with a solid account and risk-averse trading plan.

We Saw: Market surge on President, Congress wanting more stimulus money — 

• Politics late in the day stymied rally sentiment
• Market looking positive for hopes of Santa Claus Rally
• U.S. Covid-19 vaccinations pass 1 million mark

We’re Watching: Holiday plans and checking them twice —

• Sound positioning heading into New Year
• Will 2021 volatility match or surpass 2020?
• Setups in: AMZN, NFLX, BA, TSLA, PINS, DPZ