Bring on Santa.
With the fourth quarter shaping up to be another one of solid corporate profit growth and the elections in the rear-view mirror, the Santa Claus rally may just appear once more.
A Santa Claus rally is a move higher in stocks in the last week of December through the first two trading days in January. It's exact cause isn't easily explained -- theories range from year end tax considerations to people spending their bonuses to buy stocks.
In 2017, the markets rallied from late December until mid-January when the dreaded correction nailed bullish Wall Street sentiment.
The Current Backdrop
But before Santa could descend on the market with gifts, investors will likely have to endure some short-term pain. That's why you must tune into Jim Cramer's latest monthly Action Alerts PLUS member call on Sept. 13 at 11:30 a.m. It's time to get prepared for the rest of the year while staying cognizant of near-term market direction.
With President Trump ratcheting up trade war rhetoric, emerging markets stocks tanking, tech stocks selling off and many investors questioning valuations after the surprise August rally, the market is starting to look a bit toppy. The daily global advance-decline line of 73 country indices is at risk to break down from a 2018 top, points out Bank of America Merrill Lynch.
The problem with that: every time it has happened in the past the market have entered a nasty correction.
"Prior tops for global breadth in 2015 and 2011 saw deep corrections for global and US equities, but the US equity market (S&P 500) beat the rest of the world (MSCI ACWI ex US) when global breadth was weak," cautions BofA's technical analyst Stephen Suttmeier.
To be a profitable investor and build long-term wealth, you need the right information and techniques. Join TheStreet Oct. 13, 2018 for a special investing event for sophisticated and active traders. Register for "Invest Like the Pros: Jim Cramer's Boot Camp for Investors" here.