Has The Santa Rally Lost Steam?

This year the market caught an explosive bid higher on December 1st, 2010. On that day the Dow Jones Industrial Average(DJIA) climbed higher by 248.00 points. That is certainly a major move higher for a single trading day. The very next trading session the DJIA gained another 107.00 points making the total gain from December 1st and 2nd around 355.00 points in total. That gain put the DJIA at 11,362.00. However, since December 2nd the DJIA has gained only about 25.0 points from that time. The DJIA could be just consolidating or perhaps this market rally is losing steam again.

This year the Chanukah or as some would say Hanukkah holidays started early this year. This could have certainly helped the stock indexes climb as markets will usually advance before or during holidays. If you look at any holiday this year you will notice that the major market indexes advanced before every major holiday. In 2010 the major market indexes bounced ahead of the Independence Day holiday in early July and again rallied ahead of the Labor Day holiday in late August with the Ben Bernanke QE-2 announcement. Therefore, it is very important to watch for turning points around holidays especially if the markets have pulled back or were in a correction.

This year with the Santa Claus rally beginning early it is possible to see these markets slowing down. Often markets will run higher and then need to pullback a little and consolidate before trading higher. This is just the natural ebb and flow of the markets. We shall see soon enough if Santa has delivered all of his Christmas gifts early this year over the next few trading days.

Nicholas Santiago

Chief Market Strategist

www.InTheMoneyStocks.com