- This six-day historical trend begins the day after Christmas.
- And it’s the first piece of a trifecta that predicts what’s in store for the stock market.
- Chad Shoop explains the importance behind this rally, and what it means as we approach 2020.
Don’t waste your time looking for answers about the upcoming year.
Today, I’m sharing with you the first step of what I call the “trifecta” in the stock market. It’s a trend that shows us what’s in store for the new year.
This is a historical trend that’s predicted the outcome of a new year with 90% accuracy.
I’m going to explain why it’s so crucial.
And in the coming weeks, I’ll fill you in on the remaining two pieces of the triad.
I’ll give you the raw data to track in real time, so you can understand the underpinnings of the stock market in 2020…
The Santa Claus Rally Started in 1896
Last week, I talked about the presidential election cycle and what it means for 2020.
Based on that, all things look cheery for next year. But let’s go over the first piece of the trifecta, which will tell us exactly what to expect for 2020: the Santa Claus Rally.
This rally starts the day after Christmas and goes into the first two days of the new year. It’s typically a span of six trading days.
And it’s the only piece that isn’t a prediction tool, per se, for the stock market. It’s a seasonal trend.
You can watch my video below to learn more about this rally. I share a chart that explains in more detail how this rally fits into the triad, and what that means for the market.
Now, seasonal trends are instances where stocks tend to trade in a certain direction during a certain period.
This one takes place during the six days following Christmas — hence its name, Santa Claus Rally.
This trend goes back to 1896. That’s when the Dow Jones Industrial Average started. During this time, the Dow has risen 76% of the time.
The average move over the Santa Claus Rally is about 1.5%.
You may think that’s a modest move, but the fact that it’s positive three-quarters of the time gives it great significance.
For perspective, a typical six-day period in the stock market sees just a 0.2% move up. The Santa Claus Rally crushes that typical move.
This is why it warrants a significant look every year.
Last year, it marked the major turning point for the stock market.
Back then, the market experienced its worst Christmas Eve decline. But it bounced back the day after Christmas — and rallied more than 4% during those six trading days.
Santa saved the day in the stock market.
And here’s what we should watch for this time around.
1 Thing to Watch for in This Rally
This year, I’m still expecting the Santa Claus Rally to deliver a positive return in the six days after Christmas.
It may not be as prominent a rally as last year’s.
Still, the Santa Claus Rally is crucial to the trifecta, which I’ll be discussing in the coming weeks.
If it fails to deliver a positive return, then my views for 2020 will start to change — yes, it’s that big of a deal.
I’ll keep you updated on how the seasonal trend is developing, and what it means for the broader stock market as we approach the new year.
You can see the power of seasonal trends in this pattern. Yet it’s only one of the dozens of patterns I track.
By following these trends with my proprietary system, I know what stocks have the greatest potential to generate quick double-digit profits.
To learn about the other seasonal patterns, which take place each month of the year, check out this video. You’ll get to learn all about the hidden profits inside the stock market.
Stay tuned. I’ll discuss the other two parts of the trifecta in the coming weeks.
Chad Shoop, CMT
Editor, Automatic Profits Alert
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