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The S&P 500 is rising during the “Christmas period” and is expected to maintain its upward trend in 2019.

January 10, 2019 00:14
source: Chart home

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If Santa does not call, the bear may come to Broad and Wall.

This is an old saying in the financial market, referring to the "Christmas bounce" period - the last five trading days of the year plus the first two trading days of the second year. Yale Hirsch first quantified the meaning of this sentence in his book The Stock Traders Yearbook and Don't Sell Stocks on Monday.

The basic idea is that Christmas is usually a period of rising stocks.AnalystResearch shows thatSince 1928, the probability of a rise in this period has been 78%. If the stock market falls during this period, it will fall by a high probability in the next year.

During the Christmas period, the S&P 500 did rise by 1.29%. If this Christmas prophecy is correct, then this should mean an increase in 2019.

The above table shows that the random probability of the rising year has been increasing, and the trend during the Christmas season accurately predicts the coming year. Careful observation of the data found that the probability of the next year's rise after the Christmas period rose slightly higher than the random probability. However, if the stock market falls during the Christmas season, it indicates that the stock market will have trouble in the next year. But since 1980, the correct rate of forecasting the next year's decline in Christmas is only 36%.

This relationship is shown on the scatter plot below:

If the harbinger during Christmas is always correct, then you will see a consistent arrangement of dots from the lower left to the upper right. The lower left quadrant is a bad omen, referring to the market decline at the end of December, and how the market decline indicates a decline in the coming year. On the contrary, there are more points in the upper left quadrant, which means that there has been a fall in the rising cycle of Christmas, and then there has been a rise in the SP500 index in the second year, after the fall, the new year has not Continue to fall.

In any case, analysts pointed out that the "Christmas rally" is still a very good bullish signal, as there is a rise during Christmas and the probability of a rise in the next year defeats the random probability. The historical trend is better than the random increase, while the downward pressure is small.

(Article source: Chart home)

                (Editor: DF392)

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