Santa Claus Rally Hits Hundreds of Stocks but Might Reverse Quickly

The Santa Claus action on the day after Christmas was very stealthy and not reflected in the major indices.

The senior indices didn’t do much in the thin trading session on the day following Christmas. The S&P 500 was flat, the Nasdaq 100 QQQ had a small loss, and the DJIA gained about 0.16%. However, the Russell 2000 Small Cap Index IWM jumped over 1%, and the list of stocks that moved up more than 15% was too long to count. There was some very strong action in numerous smaller stocks although it occurred on lighter volume.

While this was occurring, the "experts" on financial TV were wondering if there would be a Santa Claus rally. Yes, Virginia, there is a Santa Claus rally, and it is occurring in hundreds of smaller stocks that don’t move the big indices.

While it was a nice day for many stocks, the issue is that this is not likely to be trending action. It is likely to be very volatile, and the risk of reversals is high. There will be traders looking for more small-cap speculative strength in the next few days, but this is short-term action, and if you are playing, then you had better be ready to lock in some gains when you have a chance.

The big media is missing the story, but the folks who believe in Santa Claus are finding some gifts.

Have a good evening. I’ll see you tomorrow.

At the time of publication, DePorre had no positions in any securities mentioned.