Santa Rally 2017

[rimmy2000]

In this piece, let’s look at: will we get a Christmas rally?

- What do we *mean* by Christmas rally?
- Why do we get a Christmas rally?

We’ll start by looking at the main UK index, UKX, the FTSE100. This is generally the headline value that is quoted by mainstream media ( BBC Markets ) It closes last week at 7,300.49 (w/e 01/12/17)

 

Well, what do we mean by Christmas rally?
IG provide their own detail on the Santa rally here https://www.ig.com/uk/santa-rally which you can read.

However, in summary, the Christmas rally is loosely regarded as the sustained and ongoing uptick or rise in the markets in the lead up into and beyond the Christmas holiday period. IE the indices begin to rise in a continuous and reliable fashion in the run up to the end of the year. Many have come to see it as a one-way bet. Fantastic.. easy money! Right?

Does it really happen?

Is there any truth in the matter. First, some facts. Harriman’s Stock Market Almanac provide a few statistics. ( http://stockmarketalmanac.co.uk/category/month-effects/december/ )

• Since 1970, the All Share (note, not UKX) has risen 74% of Decembers through that period.
• Since 1984 there have only been six down years.
• In average, for December, shares tend to perform weaker in the first two weeks.
• The last two weeks of December is the strongest two-week period of the year.

 

It is worth noting that trading volumes are a lot lighter during this period, as private and institutional traders book their leave, take holiday and focus on mince pies and figgy pudding* and general seasonal goodwill, rather than focusing on the stock market.
(*among other things)

Now we’ll go back a year and see what occurred during December 2016.
8.66% increase from 01 Dec 16 – 13 Jan 17
14th December was the last down day, after which 19 continuous sessions /trading days were continuously closing higher. From a low of 6678 on 02 Dec 17 to 7338 on 13 January, totaling a move of 660 points during the period. – quite staggering really. Its is also worth noting there is no particular commencement date, and that the rally continues into January, so beyond Christmas itself.

Let’s go back another year, Dec 2015 – Jan 2016
I think this year would have caught many out, especially those wanting/expecting an easy coast into the rally. 8 down sessions from the 2nd Dec – 14th, then this revered from Tuesday 15th December. Interestingly though, in terms of the total move over December the FTSE100 declined by 8.52%, and the rise over the next 9 trading days was only 7.5%. So the rally was there, it did however commence later (halfway through the month) but those hoping to pile in early would no doubt have felt a lot of pain if they saw it as a one-way bet and bought in early – having to see a -576pt drop before things picked up.
This year particularly echos what was quoted above, that the strength appears in the second two weeks of the month.

 

What about this year?

I have identified a near-term support and resistance point at around 7130. Personally, I’d be looking to see if this is tested over the next week or so. The temptation for some will be to get in early and sit it out. This isn't for me. I am no expert at predicting the indices. I note the statistics above that the latter two weeks tend to be the most predictable, so will update this around and into the 18th Dec, to see where we are at. We will then begin to look at UKX in more detail.

Thoughts and comments invited.

 

NOTE: that Christmas eve LSE operates half-day hours and Christmas day itself the markets close.

 

[Caseynotes]

Great chart here of the MSCI World Index not only showing historic December gains but also a possible 2017 straight set.

 

[Guest oilfxpro]

some years there is no rally

[rimmy2000]

thanks for that, I thought I had set that out within my post, perhaps it was not clear.

I am intersted,  and  whether either of you intend to try and take advantage if this statistical period. Do either of you trade indices? have you tried to buy into a Santa rally in previous years. What are your thoughts on the FTSE100 in the lead up to December close.

 

Cheers,

[Guest oilfxpro]

I trade probabilities like a casino with an edge, so my method will cover the santa rally, as an ordinary event.If I bet on the rally,if  the rally does not come, I will be upset and earn no money for 12 months.

 

Betting on the outcome of one event is psychologically difficult to handle.I  trade with the 

 

Warren Buffet mindset, mainly buying the dips.The psychology is explained here by Mark Douglas.

 

https://trade2winsite.wordpress.com/

 

[Caseynotes]

 & ,   

 

Yes the Santa rally has been known about for decades but the chart I posted raised some other interesting issues. That it is a world indices phenomenon most important, and also that the ‘sell in May and go away’ is also a fact, and thirdly that since the MSCI started compiling the chart in 1988 there may be growth in all 12 months of a single year for the first time.

 

But as oilfxpro so astutely pointed out the rally didn’t occur every year, only 23 out of 29 and I would not be abandoning my usual criteria for entry if I was to go longer term trading but a long bias is obviously warrented given the December rally history as well as the long bias of the previous months.    

 

GBPUSD and therefore FTSE have been problematic for the longer term trader (which I’m not) since Brexit, flying about on the whim of political remarks and statements but given the Santa rally is international I perhaps would be looking for a failed dip in one of the other indices, S&P, Nikkei or Dax.

 

[Guest Savvyscot]

Interesting views folks. Santa rally looks like one i may just take advantage of. Thanks!

[rimmy2000]

..so as the month progresses we get nearer that point of working out if we are likely to get the sustained christmas rally that we have (mostly) come to expect, I have pulled out a snippet below for consideration.

Those who were reading last weeks' NFPs thread will know we (I) was busy concentrating on the DOW when in fact, my time may have been better spent looking at the FTSE100. Today I see that Friday's session brought us close to what appears to be a firm short-term resistance in the market.

 

Look at the line in blue which is around the 7,300 mark. I have highlighted several instances (in red) where this has operated as a pivot for support and resistance, and the most recent test was last week (highlight, blue).

 

I have a penchant for trying to buy the bottom of a dip, and find it more satisfying and less nerving than buying into a rise. Perhaps Friday was our base on which the next two weeks will build. Who knows, but I will be keeping an eye on it. Meanwhile although I am not yet in the index for the rally, my individual large-cap stocks are going great, with ITV and WPP both making ground over the last few trading days, so I am getting some benefit. 

 

MACD is looking more favourable.

 

No doubt if we saw a reversion to 7,300 this week I'd be opening a starter position.

 

 

 

[Caseynotes]

All eyes are on the Wednesday FOMC meeting and rate decision. A hike is expected but the question is not only if but if yes then by how much, also what signals will be given out in the presser. The Fed has a recent history of moving one way (dove or hawkish) while warning of the strength of argument for the other so flattening the impact of any decision.

 

Increasing rates traditionally cools the index (while boosting the currency) so I would not be surprised to see a rate hike but small and with a dovish statement attached that would cause an initial increase for USD and pause or pullback for Dow before markets make up their own mind closer to the end of the week.

[Guest 121]

I Draw tragectories using the outer bands of my Bollingers 20 3.00 and on my FTSE 100 (DFB) the price crossed north of the Rubicon at 7400 on the 2hr chart that would have been Friday.

[Guest 121]

Maybe the Rubicon is due another visit then ?

[Caseynotes]

HI ,  your approach sounds very interesting, if you could post some charts would be most helpful to picture your descriptions. Many people don't like posting charts because they think it somehow becomes a prediction set in stone but no one can know the future and the more information we can gather the better off we all shall be. Patterns do re-occur and from time to time a pattern does fit but it's never a make or break thing because they so often just don't work out, don't worry about it, post anyway. 

[Guest 121]

I was going to give a lesson on the approach to Savvyscott but they did not take up my offer.

 

I haven't worked out yet how to get my charts on here - they would blow your mind ????

 

Check out my recent posts with TrendFolllower we've been really busy.

[JamesIG]

---

121 wrote:

I haven't worked out yet how to get my charts on here - they would blow your mind ????

---

Hi  are you referring to getting the IG charts uploaded to IG community? You should be able to export a chart from the new web trading platform like so... 

 

 

...and then upload it to IG Community like so. Hope this helps. 

[Guest 121]

AHA. Understood. I'm using old platform. I've taken some photo's using a camera and uploaded them and made public now just need to find out how to include in responses.

 

Thank you.

[Guest oilfxpro]

just print screen , crop using irfan view ,then include in photos

 

http://www.irfanview.com/

[Guest 121]

Thanks I will try what works best for me but for now I've uploaded some examples into my public album and will see if I can now get them into my responses for .

[Guest oilfxpro]

The only thing I say is FTSE is not as volatile as Dax, so there is more money to be made trading Dax.

[Guest 121]

[Guest 121]

Part two in answer to your question this is how I am using Bolllinger's forget what the books say !!

 

Using say 20, 3.00 many or most will be using 20, 2.00 to mark out the terrain - this is the first advantage (you can change to whatever suits your research best). You need two significant points nearest the current price/target. One line for peaks, and the other for troughs. Use the upper and lower Bollinger Bands to pick out your points many or most will be using actual prices - this is the second advantage. Then its a simple matter to back check and see what happens when price/target hits or crossess over your tragectories - if 20, 3.00 isn't working well then make adjustments till you think you got an edge (artistic license). Also research the horizontal tragectories created by the peaks and troughs of the Bollinger Bands see what happens when price/target hits or crosses over them.

 

Enjoy!

 

P.S. The above has nothing to do with my work with algorithms and the Nikkei 225! When the above works or doesn't is up to you! You always need to do your research be able to calculate the risk reward ratio when price/target hits or crossess over your tragectories - some people can do this in their head and by memory others can't.

 

P.P.S I know the above is going to spark a massive argument!!!!

[Guest 121]

You would have caught Ether this way on the 1hr chart (DBF)

[Caseynotes]

If you press fn with print screen then open ms paint then click paste you can crop from there then save as.

Or even easier, just open ms Snipping Tool and crop by dragging then save as.

[Caseynotes]

Probability of a rate hike tomorrow 87% according to the CME. S&P moving sideways at the highs, will be interesting to see what the US session open brings.

 

http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

 

[Guest Savvyscot]

my sincerest apologies if iv missed an offer to get to grips with charts and the technical stuff you talk about. Take this as my acceptance of the offer. Teach away...! P.s. im normally in fx and crypto forum, thats probably why iv missed it. Loving your info and charts on btc in that forum. Im a total numpty when it comes to charts and know next to hee haw about technical analysis (two fine scottish words included for your amusement and for emphasis!!).

[Guest 121]

Haven't done the research but everybody must be wondering will Footsie hold or where the support. Here are my thoughts of the moment.

[rimmy2000]

121, thanks for the graph, but what are the thoughts? you anticipating a breakdown i the price to next support?

[Guest 121]

To understand what I'm up to here i.e. my approach you will have to read two postings I did one for Savvyscot in my Nikkei section of my posts and another on how I use Bollingers to Caseynotes in the Bitcoin section of my posts. I am creating trajectories ahead of price for this competition we're having only. If I did the research I'd be looking for opportunities to trade when the price crosses the trajectory but the risk and money management aspect of any trade has to be backed up with your own historical research (I can't help you with that, and everything I'm showing is my own copyright i.e. I'm not following any books or what somebody else has taught me). I'm choosing timeframes where I think there is an opportunity to draw a trajectory of interest that is my starting point, see how I caught the developing breakout in Bitcoin last night.

 

[Guest 121]

Thought I would take a look at some Sterling trajectories.

[Caseynotes]

FTSE can't decide what to do so is waiting for the US session open to take a lead from the S&P.

 

 

[Guest 121]

Yes, and sterling down is good for stocks ?