[Archives]( Live]( [Twitter]( [Youtube]( [Instagram]( [Discord]( [Tiktok]( [On Tuesday, we went live with Mistletoe Mania]( The best stock picks of 2023 have been revealed...$1895 surprise gifts for everyone... [Finish off the year strong and View the Presentation Now!]( MAIN STORY The Santa Claus Effect - What You Can Expect By Tom Gentile. Dear Reader The Santa Claus Effect is spoken of and expected every December, so tradition has set expectations. Having a market rally ahead of the Christmas holiday may even perhaps be a self-fulfilling prophecy. But with the S&P 500 dropping nearly 8 percent in just five days, the pressure is mounting for a market meltdown. Letâs talk about the Santa Claus Effect and what to expect this year. The Santa Claus Rally Whether caused by excessive holiday shopping, tradition and rumor, institutional investors pension contributions or simply tax management, the Santa Claus Rally is something traders look to capitalize from. The theories about why it happens may vary, and, as with other seasonal events, there is no guarantee the rally will materialize. The week leading up to the Christmas holiday is bullish more often than bearish according to history. But the number of positive growth years depends on how far back in time you look at the data. Some data has discovered the S&P 500 offers a 65% chance youâll see positive returns the week ahead of Christmas. Keep in mind, however, the other 35% of the time, when the market incurs losses ahead of the holiday, losses end up being greater than the gains by nearly 2 to 1. Over a 20-year period, the index gains have averaged just over 1.5%, but losses exceed 3% during bearish periods. Also, the Santa Claus rally time frame is debatable â some consider the week before Christmas, while others include the week following in their analysis. My Scanner Illustrates the Potential for Holiday Gains Using my Toms Option Tools app, I ran a scan that looked back nearly 20 years, which included the week ahead of Christmas and the week following. When I combined the two-week period, youâll be pleasantly surprised about the results. By using my tools, I found that the SPY had positive returns 84% of the time, but the gains averaged only 1.22%. So, while there are good odds for bullish behavior the week before and after the Christmas holiday, the gains are certainly modest. Now, letâs think about the strain the market has been under this week. Between December 13 to 19 the SPY lost close to 8% of its value â creating âoversoldâ market conditions. Although volumes were quite heavy on some of the sell-off days, this type of selloff leads to âbargain shopping. Historically, when the general market loses 10% of its value it has âcorrectedâ in the minds of some, and you can often count on a bullish bounce after such strong selling. It didnât help that economic concerns are prevalent, so as the market fell this past week, bearish momentum is building. Why We May Be Disappointed I mentioned above that my scan found 84% odds the market will rise the week before and after Christmas, but that also means there is 16% odds weâll have negative returns. We may very well see a market pop over the next week or so, but just keep in mind that itâs much harder to realize positive gains once the market falls sharply as it has just prior to the Santa Claus rally commencement. Whether you look to the odds and decide on taking a trade or not, the last couple of weeks of the year can be used to reflect on the good and poor trading choices weâve made throughout the past year. Iâll plan on taking some time off next week for that very reason â to reflect, and then to prepare for the coming year. I hope youâll do the same. Tom Gentile America's #1 Pattern Trader Join Tom each Monday through Wednesday at 12:00 p.m. ET as he discusses a range of strategies to make money in a strained market environment. Did you miss the Live session? Watch Tomâs replays! FEATURED ARTICLES [The Rally Won't Last - Here's What to do.]( [Five Indications the Market has NOT Bottomed]( [This Bear Market Rally Could Prompt a 2001-style Crash]( GET STARTED [Options 101: The Easiest Options Guide Youâll Ever Read]( With anything and everything youâll ever need to know about trading options, this is the best guide to making money in the markets you can get. [Straddles â How to profit up or down!]( Is there a way to trade options regardless of market direction? The answer is YES! Straddle trading takes the guess work out. Straddles can profit if the stockâs price rises OR falls on speculation. [Earnings: The IV Crush]( Trading options is a zero-sum game, meaning there will always be a winner and a loser on either side of a trade. Trading through an earnings report and losing in spite of the fact that the underlying stock price went in your intended direction can feel like getting stung by the biggest bee in the hive â Ouch! There is a right way to trade earnings. [The All-in-One Chart]( Welcome to my guide on the All-in-One Chart. The charting tools are made available for you to utilize in Tomâs Optionâs Tools. My All-in-One Chart is made up of several components to help evaluate charts. Although there are many other factors involved in decisions regarding trades, chart analysis is a part of the process. [How to set up a Microcurrency Account]( Currencies make up the biggest market in the world today. In fact, every single day, up to $6.6 trillion is traded in the currency market. But thereâs something extraordinary happening in this massive global market⦠Itâs all hidden in a tiny offshoot thatâs helping regular, everyday Americans become rich in the blink of an eye. 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