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We are just less than a fortnight away from 2026 and the big question remains. Investors and traders want to know if we will have a Santa Claus Rally in 2025?

If history is any guide, then the answer is yes, but there is no guarantee. The traditional Santa Claus Rally period is a seven-day bullish period that begins on Christmas Eve and extends into the new year. Yale Hirsch coined this term some 53 years ago. He noticed that markets saw a lot of bullish action during the last few sessions of the year. And he noted that bullish action typically continued into the new year. It occurs around 77% of the time, and the average gain is about 1.5%.

If markets go up 1.5% this year, all four indices could rise to new highs into 2026. That would really be something, considering the markets have been up strong for three straight years and are looking to rise again. For now, let’s look at the S&P 500’s chart from the close on Friday to see if there is a good setup for running higher.

Will we have a Santa Claus Rally in 2025?

The SPX500 just tested the 50-day moving average to work off some of the froth that had built up following last week’s Fed meeting. The bulls were not happy with the pullback, but it was necessary to reset the markets in advance of another move higher.

Conditions are overbought, which will make it very difficult to push the markets even higher right now. Economic news that had the potential to shock the markets to the downside have been released. Anything can happen of course, so this is not the time to be complacent.

(Click on image to enlarge)

The chart shows a budding move on the MACD (bottom pane). If it cross into a bullish reading, it will serve as a key indicator to push markets higher.

A followthrough day from Friday could also create a move to the upside.

And finally, the relative strength indicator (top pane) is not overbought and has room to move upwards.

Pay attention to the action early this week, it may foretell how the rest of the year may go.

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