Market Outlook
As confirmed in the graph below the Santa Claus rally failed as all the major stock indexes ended down with the Dow Jones Industrial Average (DJIA) the biggest loser. Technically the so called “Santa Claus” rally includes the final five trading days of the year and first two trading days of the New Year. Normally, during this week the S&P 500 posts an average gain of 1.5% since 1950. The failure of stocks to rally during this time tends to precede bear markets or times when stocks could be purchased at lower prices later in the year. The lack of a rally can be a preliminary indicator of tough times to come. This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second worst bear market in history. 
By Gregory Clay
Investment Strategist
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