Holiday Stock Trading Begins: How Investors Are Front-Running Christmas

Precious metals were the winners on Monday as gold and silver hit new all-time highs, but it was classic "holiday" trading with an upbeat mood and good action in speculative small caps. About 60% of stocks advanced, with the Russell 2000 (IWM)  gaining 1.1%. The Nasdaq 100 lagged a bit but still managed a 0.3% gain.

There isn’t much scheduled news flow for the rest of the year, but traders are anticipating positive Santa Claus action and are focused on individual stock picking. There was a good supply of big upside movers with over 100 names moving up more than 10% and 260 new 12-month highs.

The traditional Santa Claus rally doesn’t officially start until the day after Christmas, but traders are front-running the action. This year, with Christmas falling on a Thursday, the full-day session on Friday is going to be very lightly traded, as many market players will prefer to enjoy the holiday.

If we continue to run up in the next two sessions, we’ll have a "sell the news" setup when the standard Santa Claus period starts on Friday.

We will see what happens, but this is good action, and there isn’t any pending news that is likely to cause difficulties. I’d like to put some more money to work in short-term trades, but it is tricky to chase, especially as volume is going to start declining very quickly. Also, it is not unusual to see some profit-taking into year-end markups in the last few sessions of the year.

At the time of publication, DePorre had no positions in any securities mentioned.