Let's Just Chalk it Up to Cultural Differences

The "Santa Rally" is an actual and seriously tracked phenomenon on Wall Street, not just some urban legend. It officially starts tomorrow, since the market is closed on Monday for Christmas. In a way, it almost seems like an entirely different market culture during the holidays. 

Specifically, the Santa Rally is the last five trading days of this calendar year, spilling over into the first two trading days of 2024. On those rare occasions where there is, in fact, no rally during the Santa Rally period, it is often a bearish omen for 2024. 

Hence, yesterday's big afternoon downside reversal followed by this morning's bounce-back may very well just be setting the table for either the widely-anticipated Santa Rally or a surprise flop. 

But what strikes me as most interesting is that this morning's bounce seems to be stalling on the S&P 500 Index (10-minute chart, below) at around the midpoint of yesterday's big range. In order for us to see that Santa-lack-of-Rally, bears simply must not allow price to move back up to yesterday's highs for the bearish engulfing (on the daily chart) candle to hold true as a bonafide reversal after the sharp rally since pre-Halloween. 

Also note how quickly the VIX got off the mat this morning and went green well before the S&P faded the initial intraday bounce.