Weekend Reading: Last Chance For Santa Claus

So far, the month of December has sucked.

From Powell to Gundlach, to Trump, and a falling oil prices, there hasn’t been much “holiday cheer…”

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However, with the market very oversold, there is still hope that “Santa Claus” could soon appear.

If we take a look back at history, going back to 1957, we find that only a small percentage of the time does the market decline for more than 4-weeks in a row without a reflexive bounce.

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The red vertical bars are every 4- or more consecutive negative return weeks as compared to the S&P 500. As you will note in the statistics, out of the total period of time analyzed 57% of weeks are positive versus 43% negative. Notice that “clusters” of 4- or more negative weeks occur around market peaks and bear markets as opposed to bullish market trending periods. The last cluster of periods was during the 2015-2016 correction.

Of the total number of negative weeks, 33% were negative 4- or more weeks consecutively. However, those 4- or more negative weeks only accounted for a 14% of the total periods analyzed.

However, what about the month of December only. The chart below is the same as the chart above but looks at ONLY the months of December.

(Click on image to enlarge)

What we find is that of all the months of December going back to 1957, there have only been 9-December months that posted 4-consecutive negative weeks.

While we are currently 3-weeks into a very brutal month of December, there is still hope of an oversold bounce to “sell” into heading into the new year. There is a case to be made for this as mutual, pension, and hedge funds “dress” their portfolios for year-end reporting. However, January could well see a resumption of pressure as mangers can sell positions with still large gains and defer taxes into 2020.

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Disclosure: The information contained in this article should not be construed as financial or investment advice on any subject matter. Real Investment Advice is expressly disclaims all liability ...

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