Santa Claus Rally Official Results: Santa Fails to Visit Wall Street
By: Jeffrey A. Hirsch & Christopher Mistal
January 05, 2015
As defined in the Stock Trader’s Almanac, the Santa Claus Rally (SCR) is the propensity for the S&P 500 to rally the last five trading days of December and the first two of January an average of 1.5% since 1950.

The lack of a rally can be a preliminary indicator of tough times to come. This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second worst bear market in history. 

Including this year, Santa has failed to pay Wall Street a visit in just 14 years since 1950. Of the previous 13 occasions, January’s First Five Days (FFD) was down 10 times and the January Barometer (JB) was negative 7 times. When all three indicators were negative, the full year was either flat (+/– 5.0%) or negative with the lone exception being 1982, the year the last secular bull market began.

The lack of a positive SCR is cause for concern, but further clarity will be gained when the January’s First Five Days Early Warning System (page 14, STA 2015) gives its reading later this week and when the January Barometer (page 16, STA 2015) reports at month’s end. A positive First Five Days and January Barometer would certainly improve prospects for full-year 2015. The December Low Indicator (2015 STA, page 44) should also be watched with the line in the sand the Dow’s December Closing Low of 17068.87 on 12/16/14.

[S&P 500 January Early Indicator Trifecta — DOWN SCR Table]