IS SANTA COMING TO TOWN THIS YEAR? SEE HOW I’M PLAYING THE POTENTIAL RALLY LIVE AT 1 PM ET!
The S&P 500 has been flirting with all-time highs for weeks now, but if you zoom out, the market has been stuck in a sideways chop since Thanksgiving. Low volume, institutional desks shutting down for the year, and a focus on bonuses all point to one thing — a market propped up by the heavyweights.
Yet, according to Goldman Sachs, the Santa Claus rally is already in full effect.
So, let’s take a closer look at what’s driving this market action and what we can expect as we wrap up 2024 and head into the new year.
What’s Holding the Market Up?
On the surface, the S&P 500 (SPY) looks healthy, sitting near all-time highs. But take a look under the hood, and the cracks start to show. The equal-weighted S&P 500 (RSP) tells a different story — it’s been grinding lower while the broader index floats higher.
So what’s the difference?
It’s the large-cap names doing all the heavy lifting. Specifically, the Magnificent 7 — Apple (AAPL), Google parent Alphabet (GOOG), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA), Amazon (AMZN) and Meta Platforms (META).
Apple is doing exceptionally well, with Google right alongside it — likely hitting all-time highs.
Microsoft isn’t as strong, but it’s still holding its ground. When institutions want to keep the market propped up — especially as we head into year-end performance calculations — this is where they throw their money.
The logic is simple…
If you need to keep the S&P 500 elevated, you don’t waste time spreading capital across hundreds of smaller stocks. You go straight to the largest names, where the impact is immediate and significant. The Mag7 stocks make up about 33% of the S&P 500.
Low Volume and Institutional Incentives
It’s no surprise that December comes with lower trading volumes. Institutional participation drops off as desks close for the holidays, and most of the senior traders are already on vacation. The “junior guys” left behind aren’t looking to make waves — they just want to maintain performance and avoid anything that could tank the books.
This creates the perfect environment for a Santa Claus rally — a market that’s artificially held up, floating on low volume and institutional incentives.
But how long can it last?
Goldman Sachs believes the rally is here to stay through the end of the year, and that’s a safe bet given the lack of selling pressure right now. But once the calendar flips to 2025, all bets are off.
The Santa Claus rally — if it plays out as expected — could give the S&P 500 the final push to close the year strong. But what happens in the first two weeks of January is key.
Low volume and institutional propping can only hold for so long. Once traders return to their desks, we’ll see if the cracks in the equal-weighted index — and the reliance on large-cap names — turn into something bigger.
If you want to get my full breakdown of what I see happening and how I plan to trade it, I’ll be live at 1 p.m. ET today, Dec. 17, for my official Santa Clause Rally briefing, and I’ll be joined by Nate Tucci!
Just go here to join us at 1 o’clock!
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. My Santa Claus Rally Briefing Is Set to Begin at 1 PM ET!
I’m hosting the holiday market event of the year at 1 p.m. ET today, Dec. 17, with options specialist Nate Tucci called The Santa Claus Rally Briefing right now!
- My No. 1 way for identifying and capitalizing on Santa Claus Rally opportunities.
- Exactly how I spot the “hidden gems” the market often overlooks during this busy season.
- The exact steps I take to target 100% returns as we close out the year.
I can’t guarantee results or against losses, but you don’t want to miss out on your chance to make the most of the Santa Claus Rally.
There are only so many days left on the calendar to capitalize!
