Tomorrow starts the period that corresponds to the so-called “Santa Claus Rally”. This period includes the last five sessions of the year and the first two of the new year. Over the past 28 years, the S & P had a positive performance 25 times with an average gain of 1.74%. However, as the S & P already appreciated 6% in the last four sessions, it is likely that the Santa Claus Rally this year has already been at least partially anticipated. There is a pattern that has repeated in the last 30 years, during the month of December. This pattern consists of a rise in major indexes during the first 8-10 days of the month, a decline in the interim weeks of the month and the occurrence of “Santa Claus Rally” at the end of the year. So far, this standard has been met.
psaTrading posted: Tomorrow starts the period that corresponds to the so-called “Santa Claus Rally”. This period includes the last five sessions of the year and the first two of the new year. Over the past 28 years, the S & P had a positive performance 25 times with an average gain of 1.74%. However, as the S & P already appreciated 6% in the last four sessions, it is likely that the Santa Claus Rally this year has already been at least partially anticipated. There is a pattern that has repeated in the last 30 years, during the month of December. This pattern consists of a rise in major indexes during the first 8-10 days of the month, a decline in the interim weeks of the month and the occurrence of “Santa Claus Rally” at the end of the year. So far, this standard has been met.
Better risk management and opportunity management: It helps to look at the tails of your P/L distribution. Please Size positions appropriately, utilize reasonable stops, ensure that multiple positions are sufficiently uncorrelated, etc. Cutting opportunity short can significantly weigh upon overall returns. Plotting your P/L for each trade and looking at the shape of the distribution will tell you a great deal about your management of risk and opportunity.
Today the stock markets traded with minor variations.
The week will be shorter than usual, due to the closure of markets worldwide on 1 January 2015. Many investors are taking advantage by using vacation time and equity trading volumes are more subdued than usual.
The attention was mainly focused on Greece. The Government once again fails to elect the President of the Republic, which brought some panic among investors, since this failure results in the holding of early elections. The Athens stock exchange fell as more than 12%, but closed with a lower fall to 3.5%.
The main US stock markets closed the session on Monday in a mixed record, with the SP 500 at new highs and the Dow Jones declining slightly.
American indices closed lower on the last day of the year, breaking the upward trend started in mid-December and that allowed the S&P to appreciate 8% in 6 sessions. Falling US stocks may be explained by a number of factors. The first is that many fund managers, who were able to follow the positive performance of the US stock market during 2014, realized capital gains, thereby creating selling pressure. This trend was particularly visible in the utilities sector, which was the best performer of the year with a rise of 24,28%. The second is that other investors materialized, for tax purposes, capital losses which had in some titles. The third and final reason was the fall of the oil traded in New York, who led their sector to a loss of 0.80% in the session, accumulating a decline of 10% in 2014, which deeply contrasts with the recovery of 11,40% of S&P. The effect of these factors was boosted by the lack of liquidity typical of this season. The economic data did not have any impact on the session. Today, many investors are still on vacation, so the volume should be reduced. Still, the publication of economic data, including the ISM index, which measures manufacturing activity in the country, should be closely monitored.
The new year is already showing many challenges and uncertainties. In the European case, the biggest challenge and risk is represented by the political situation in Greece. This issue is aggregate two fronts. The first is internal and marked by the election campaign. The second is broader and is represented by the response of several European countries to the events of the election campaign in Greece. The weekend brought some developments on both fronts. In the election campaign, the party leader of anti-European left Syriza, Alexis Tsipras said that if he won the next election (25 January) would promote a series of nationalizations and would repudiate a part of Greek debt (about 320 000 M. €). If these promises become facts it is almost certain Greece will leave the Eurozone. Against this speech, the German newspaper Der Spiegel, citing a source close to Chancellor Angela Merkel said that Europe will be prepared for a Greek exit from the euro zone (a possibility which is called by Grexit in the financial world), covertly saying it would be this country the main victim in such a scenario. Given these developments, the European currency fell to below 1.20 against the dollar, the minimum in recent years. With the appreciation of the dollar, oil depreciated.
Parallel to the political situation in Greece, investors will follow the news and rumors for the ECB, which will meet on 22nd this month. Until then, Mario Draghi will firstly analyze the economic data to be published while trying to gain more consensus around the implementation of a sovereign debt purchase program.
US markets retreat before the weakness of European markets and some disappointing data. The sharp drop in oil prices led to the closure of several oil wells in Texas, in North Dakota, Wyoming and Colorado, which not only affected this sector as local economies.
In the coming days, the US stock market will be marked by the contrast of two different factors. Firstly, the uncertainty hovering in Europe. On the other hand, the fact that US funds have gathered 36 000 M.USD subscriptions in the last two weeks of 2014.
European stock markets traded without a clear trend and nervousness dominated investor sentiment. Yesterday, European shares suffered heavy losses, explained by the confluence of several factors: the fall of the oil, the depreciation of the Euro and the situation in Greece. Sometimes financial markets tend to underestimate the importance of a factor, but when its ramifications become evident give you an exaggerated importance. Most likely, the previous day fits this definition. Technically, the area of 9500 is an important support for the DAX, to be the most representative index of the European market. If this level is broken permanently (yesterday DAX ended in 9473), the probability of the German index test in the coming weeks, the minimum December (9219), increases significantly. The publication of the PMI index for the services (relating to major European economies and the euro zone as a whole) usually do not have a significant impact on the trend of the stock markets, however, given the negative sentiment prevailing among investors negative readings exacerbate weaknesses.
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors.
Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance.
You could lose some or all of your initial investment. Do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.
Any data and information is provided 'as is' solely for informational purposes, and is not intended for trading purposes or advice.
Past performance is not indicative of future results.