Jump to content

Will the Santa Claus Rally Finally Begin? - MKT Call: Macro

Recommended Posts




  • Omicron variant concerns are plaguing risk assets, but the VIX futures and options expiry is mid-week, potentially clearing the path for risk assets to rally through the end of the year.
  • Fed hike odds have slumped and the US Treasury yield curve has flattened, holding back the US Dollar (via the DXY Index) from fresh yearly highs.
  • Gold prices can’t seem to gain any traction despite last week’s bullish outside engulfing bar.

Wall St Week Ahead 'Santa Claus rally' threatened by COVID-19 resurgence,  Georgia elections | Reuters


In this week’s edition of MKT Call: Macro (formerly The Macro Setup), we discussed how mega cap tech stocks are masking disappointing breadth in US stock indices, what cryptocurrency markets’ recent struggles mean for forecasters expecting bigger gains in 2021, and the evolution of Fed hike odds and their impact on FX markets. Whether or not Santa Claus comes to deliver a rally in risk assets – particularly US stock markets – is very much in question.

Of course, much of recent price action in global financial markets has been influenced by concerns around the COVID-19 omicron variant, which is spreading more rapidly than any other strain throughout the pandemic thus far. But data from South Africa suggests that, while more transmissible, omicron is proving far less lethal than other variants (delta included), suggesting that this most recent surge in infections may not have a longstanding impact on global growth – which has been downgraded in recent weeks.

Markets seem to be looking past the omicron variant in many respects, particularly when it comes to what central banks will be doing in 2022. Instead, with several central banks – the Federal Reserve included – predicting aggressive rate hike cycles in order to combat high inflation, it may be the case that markets are starting to price in slower growth over the next few years.

Indeed, despite the Fed outlining six rate hikes through the end of 2023, rates markets are actually pricing in fewer rate hikes today than they were ahead of the December Fed meeting. Eurodollar contract spreads are discounting approximately 15-bps fewer through the end of 2023 than they were at the start of the month, and with the US Treasury yield curve flattening, the US Dollar (via the DXY Index) has been held back from further advances in the near-term.

*For commentary from Dan Nathan, Guy Adami, and myself on the US Dollar (via the DXY Index), the US S&P 500, gold prices, Bitcoin, among others, please watch the video embedded at the top of this article.



Will the Santa Claus Rally Finally Begin? - MKT Call: Macro


Will the Santa Claus Rally Finally Begin? - MKT Call: Macro


Will the Santa Claus Rally Finally Begin? - MKT Call: Macro


Written by Christopher Vecchio, CFA, Senior Strategist, 21st December 2021. DailyFX

Link to comment
15 minutes ago, Kodiak said:

Santa came early this year😀


Hi @Kodiak



Will there be a Santa Claus rally? The bulls say yes.

The Santa Claus rally is a very specific event. It is the tendency for the market to rise in the last five trading days of the current year and the first two days of the new year. First discovered by Yale Hirsch of “Stock Trader’s Almanac,” it has produced positive returns 34 of the past 45 years for an average return of 1.4%.


The problem, of course, is that this isn’t anything close to a normal end to the year. We are not just dealing with omicron. We are dealing with a Federal Reserve that is withdrawing liquidity and is intent on beginning rate hikes some time in the second half of the year.

For more on this article: Santa Claus rally hopes very much alive on CNBC

All the best - MongiIG

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 01/02/23 08:55
  • Posts

    • Csx Corp., Elliott Wave Technical Analysis Csx Corp., (CSX:NASDAQ): Daily Chart, 1 February 23, CSX Stock Market Analysis: I slightly changed the count anticipating the bottom of wave 2. We reacted off equality of C vs. A as we move back higher into the averages.   CSX Elliott Wave Count: Wave {c} of 2. CSX Technical Indicators: Below all averages CSX Trading Strategy: Looking for a break of {b} to start looking for longs.   TradingLounge Analyst: Alessio Barretta       Csx Corp., CSX: 4-hour Chart, 1 February 23, Csx Corp., Elliott Wave Technical Analysis CSX Stock Market Analysis: The count for wave {c} has been a little challenging. The best idea is an expanding diagonal in wave {c}.   CSX Elliott Wave count: Wave i of (i). CSX Technical Indicators: Cross of 20 and 200EMA.   CSX Trading Strategy: Looking for confirmation to then build longs after a clear five wave move to the upside.
    • Early Morning Call: currency market little changed ahead of Fed rate decision tonight Watching USD ahead of the US rate decision at 7pm UK and BoE and ECB tomorrow.  Jeremy Naylor | Writer, London | Publication date: Wednesday 01 February 2023  Indices overview European indices opened higher on Wednesday, following the lead of US and APAC equity markets. In China, Caixin factory activity continued to shrink in January, although more slowly, according to the Caixin survey. China's Caixin/S&P Global manufacturing purchasing managers' index (PMI) rose to 49.2 in January from 49 in December, staying below the 50 mark for a sixth straight month. This is a contrast with Official NBS data earlier this week, that showed factory actvity's return to growth. Forex There is very little movement on the currency market this morning. The dollar is broadly flat as investors await the conclusion of a Federal Reserve (Fed) policy meeting. The US central bank is expected to raise interest rates by 25 basis points later today, to a range of 4.5% to 4.75%. Also expected today, Eurozone consumer price index is expected to rise 9% year-on-year (YoY). In the US, ADP employment change is expected at 1.15pm. The private sector is expected to have created 170,000 jobs in January. ISM manufacturing PMI is forecast to fall to 48 in January, after 48.4 the previous month, and JOLTs job openings are expected to fall to 10.23 million in December. Equities On the equity market, Vodafone reported a slowdown in its group service revenue growth to 1.8% in the third quarter (Q3) from 2.5% in the second, driven by declines in continental Europe. GlaxoSmithKline posted higher-than-expected Q4 profit and sales and forecast a 6% to 8% rise in sales for 2023 and a 10% to 12% increase in operating profit. And Swiss pharma group Novartis expects that core operating income will grow in a "mid-single digit" percentage range in 2023, following stagnation last year. In the US, Advanced Micro Devices shares rose in extended trading, after posting marginally better-than-expected earnings and revenue for the fourth quarter and expressing confidence in the outlook for 2023. The chip maker earned 69 cents per share. Adjusted fourth-quarter revenue rose 16% to $5.60 billion. AMD's data centre segment revenue grew 42% to $1.7 billion, offsetting a 51% drop in revenue of the client segment. AMD CEO Lisa Su said she was confident AMD would keep gaining market share this year, adding that the second half of the year would be stronger than the first. The company forecasts a current quarter revenue of $5.3 billion, plus or minus $300 million. Analysts on average expected revenue of $5.48 billion, according to Refinitiv. Snap shares tanked as much as 14% in extended trading last night, after the owner of the photo messaging app SnapChat warned that the headwinds the company faced over the past year would persist throughout the current quarter. Revenue for the fourth quarter ended December 31 was $1.3 billion, flat from the prior year and in line with analyst expectations. Snap posted a net loss was $288 million, versus net income of $23 million the previous year. On an adjusted basis, it reported earnings of 14 cents per share, beating Wall Street estimates of 11 cents. In a letter to investors, Snap said it suffered from a weakening economy, and increased competition from other social media platforms, adding that current quarter revenue could decline by as much as 10%. Tonight, after the US closing bell, Meta Platforms, the parent company of Facebook, is expected to post earnings of $2.26 per share, which would correspond to a 40% decline on Q4 2021. Revenue is likely to decline by 6% to $31.53bn. Meta lost roughly two-thirds of its value last year, leading the group to part with 13% of its workforce.   This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
    • Investors are bracing themselves for a busy three-day period ahead. Today's big event will be the Fed decision, at which a 25bps hike is expected, though we also have the monthly ADP private payroll report at 1.15pm. From there the action intensifies, with two more central banks tomorrow lunchtime, followed up by a trio of big tech earnings after the bell, and then the monthly US jobs report on Friday. The Fed's move will be the smallest in ten months, and marks a distinct slowdown from its aggressive tightening of late last year, but we are not yet at a point where the Fed feels a pause in rate hikes is appropriate. An air of caution hangs over markets, unsurprisingly, with the next few sessions likely to be a major determinant in whether the rally in stocks continue, and whether the dollar's retreat from last year's highs will intensify. Also on the calendar today is the earnings release from social media giant Meta, which has seen its stock price fall precipitously over the past year.   
  • Create New...