Coming Week: Santa Baby

Though trading will be light in the coming week, Wall Street watchers are hoping that a Santa Claus rally will be comin' to town.

"While there is a growing uneasiness of late, I expect the markets to trend higher next week in a Santa Claus rally as traders and investors cast their eyes to 2007," says Randy Diamond, sales trader at Miller Tabak. "Good old St. Nick would not want to ruin a nice run by leaving a lump of coal for investors."

The so-called Santa Claus rally is a jump in the price of stocks that often occurs in late December. There are numerous explanations for this phenomenon, including bonus dollars being put to work, cheerfulness around Wall Street, and a general lack of sellers.

Last week, it was the Grinch, not Santa, who controlled the market. The Dow lost 102 points, or 0.8%, snapping a two-week win streak. The S&P 500 was lower by 16 points, or 1.1%, and the Nasdaq relinquished 56 points, or 2.3%, over the five sessions.

Stock and bond markets will be closed Monday for the Christmas holiday. One potential offshoot of a low-volume, holiday-shortened week on Wall Street is stock prices getting carried away in a burst of momentum trading.

Traders say investors might not want to read too much into a move should a small Santa Claus rally snowball into something larger.