E-mini S&P 500 Index (ES) Futures Technical Analysis – Tuesday Marks Official Start of Santa Claus Rally Period

March E-mini S&P 500 Index futures are pointed toward a flat opening based on the pre-market trade with investors hoping they continue to build on gains in the record-setting rally into the year-end. Trading is expected to be muted in Christmas Eve trading and the market will be closed at 18:00 GMT.

At 14:05 GMT, March E-mini S&P 500 Index futures are trading 3228.50, up 1.25 or +0.04%.

According to CNBC, the S&P 500 has risen 2.6% for December and 8.3% for the quarter. It is also on pace for its best annual performance in six years, up 28.6% for 2019 through Monday’s close. If the benchmark ends the year up 31%, it will score the best year since 1997.

The S&P 500 is currently trading at about 18 times forward earnings, the highest level since January 2018, according to FactSet. But that is old news according to some analysts.

“The equity narrative is the same as it was at Monday’s close and probably will stay unchanged for the remaining 1.5 weeks of 2019,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “But investors will return in January to find a complacent market trading at very elevated multiples and harboring unrealistically optimistic expectations about an upward inflection in growth/earnings momentum.”

Santa Claus Rally Rules and Tendencies

“Tuesday marks the official start of the Santa Claus rally period, which happens on the final five trading days of the year and the first two trading days of the new year. Stocks tend to have unusually strong performance during those trading days with the S&P 500 averaging a 1.3% gain since 1950,” according to the Stock Trader’s Almanac.

The market has also posted a strong performance over the last 10 years, down only two times.

Finally, investors have been adding more risk as 2019 comes to a close, ditching bonds for equities as U.S. stocks rally into the end of the year. On Tuesday, the U.S. equity markets will close at 18:00 GMT and Treasury markets an hours later at 19:00 GMT.

The U.S. markets will be closed on December 25, Christmas Day.