It may not be the most disappointing thing you’ve ever heard in regards to Santa Claus, but Jeff Hirsch of Stock Trader’s Almanac has some disappointing news for those still waiting for the rally to save the markets of the same name.
“Everyone likes to say all sorts of year-end rally is the rally in Santa Claus,” says Hirsch. “The Santa Claus rally is the last five days of the year, plus the first two days of the next.”

Now that I feel like a dull draw for cookies and milk by the tree rally money in my living room for the last two weeks Hirsch is free to explain what should I do with this new information.

First, I can better focus on my book. Hirsch says that his version of the rally is shorter in time, but makes up for it with efficiency and powers of prediction. On the return, the average gain in those seven trading days was 1.5 to 1.7% for half a century. However, if the market fails to rally, Hirsch believes that in itself is telling.
“If Santa Claus does not call the bears may come to Broad and Wall (Street),” says Hirsch. In 1999 and 2000, 2007-08, as well as harbingers of doom have been recently, as investors would be well served to listen.

Hirsch points out the limitations of basing a strategy to invest in seven trading days. And ‘data mining, and as Hirsch puts it, “if you torture the numbers long enough you can get them to say anything.” What these numbers tell us that it is better to pay at least some attention to trade at the end of next month.

Before dismissing the data gleefully watch the tape for the last decade and especially in 2011. It’s not really the place of any investor to get snobby about their testing methodology error, it is now?