Santa's Late Arrival: Can Bulls Salvage the Rally?
Stocks are kicking off 2026 with a rebound as traders look to dodge a rare Santa Claus rally failure. Here's my game plan with the first five days in focus.
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Following an ugly finish to 2025, stocks are rebounding on the first trading day of 2026. The much-anticipated Santa Claus rally has yet to materialize, with the S&P 500 down about 0.7% since Christmas Eve. However, the window isn't closed yet. There are two sessions left in the "official" Santa Claus rally period, which will conclude after the Monday session.
The S&P 500 has recouped most of its recent losses in the premarket on Friday, keeping the possibility alive that Santa may still deliver a positive result. S&P 500 Futures are up roughly 0.43% in the early action, signaling a concerted effort to erase the December deficit. Since there wasn't a clear technical or fundamental catalyst for the year-end weakness, conditions are ripe for a rebound as short-term traders move in to take advantage of recent mispricing.
Leading that charge are the Magnificent Seven (MAGS) names. In early trading, there is a broad-based "tech-led" bounce with Nvidia (NVDA) leading, up 0.62% as it continues to absorb news of its recent talent acquisitions in the AI inference space.
The 'Naughty' List Statistics
The way the calendar falls—with just a one-day session tucked in front of the weekend—will likely produce thinner trading than normal Friday. Many market participants won't be fully back at their desks until Monday.
That makes Monday's close the "must-watch" event. There is an old market saying: "If Santa should fail to call, bears may come to Broad and Wall." Historically, the data back this up:
- When Santa Calls (Positive Rally): The S&P 500 has averaged a 1.4% gain in January.
- When Santa Fails (Negative Rally): The index has averaged a 0.2% loss in January.
While the correlation is there, I question if the sample size of "failures" is truly large enough to be statistically significant for a long-term outlook. In any case, a late-appearing Santa would certainly help sentiment, which is typically upbeat as investors prepare their playbooks for the year ahead.
The First Five Days vs. the Long Haul
Another Wall Street statistic receiving attention right now is the "First Five Days" indicator, which correlates strongly with annual results.
- If the first five trading days of January are positive, the S&P 500 has gone on to finish the year in the green 82% of the time, with an average gain of around 14%.
While that is a compelling correlation, it doesn't offer much help in navigating the day-to-day market unless you are strictly a "buy and hold" S&P 500 investor. I can guarantee that if the index does finish 2026 with a gain, it won't do so in a straight line. We have plenty of volatility ahead, and volatility is where the best opportunities will arise
My Game Plan
We have an upbeat start to 2026, and there will be some natural pressure to produce a gain before the Santa Claus rally period officially expires.
At this point, my game plan is to expand my shopping list and be more aggressive in looking for entry points in new names. I want to put fresh ideas on the radar and start developing plans for ramping up position sizes as these new setups develop.
At the time of publication, Rev Shark had no positions in any securities mentioned.
