Chart of the Day - Wednesday, December 23rd, 2020

Today’s Chart of the Day was shared on Twitter by Ryan Detrick of LPL Financial Research (@RyanDetrick). Ryan points out that the Santa Claus Rally begins tomorrow. This phenomenon, popularized by the Stock Traders Almanac, refers to a bullish seven-day stretch that takes place in the last five trading days of December and the first two trading days of the new year. This seven-day stretch is more likely to be positive than any other seven-day stretch of the year. Over the past 70-years, the S&P 500 has risen 77.9% of the time, for an average gain of 1.33%. Now before we get too bulled up, there's a flip side to this coin. As the founder of this phenomenon, Yale Hirsch, once said, "If Santa Claus should fail to call, bears may come to Broad and Wall." In other words, if returns are negative during this seven-day stretch, it would be a big red flag. As you can see, every time these seven days have been negative over the past 20-years, January has also been negative. So whether you're bullish, bearish, or neutral, it would be wise to keep an eye on the action in the S&P 500 over the next seven trading days. For more on this, check out the full note here.