Will Venezuela Provide the Fuel for a Positive Close to the Santa Rally Period?
Here's my trading game plan as stock buyers attempt to thwart a streak that hasn't happened since 1950.
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With just one trading session remaining in the traditional Santa Claus rally period, the S&P 500 needs a gain of roughly 0.75% Monday to climb into positive territory. If it fails to do so, it will mark the first time since 1950 that the Santa Claus rally has posted a negative outcome for three consecutive years.
Venezuela and the Global Ripple Effect
The S&P 500 is trading higher in the premarket as investors digest the dramatic weekend events in Venezuela, following the U.S. military operation to remove Nicolás Maduro. The primary impact is being felt in:
- Oil: Prices are volatile as the U.S. moves to secure "total access" to the world's largest reserves.
- Defense: Aerospace and defense contractors are seeing a bid on expectations of increased regional activity.
- Precious Metals: Gold and silver are attracting safe-haven interest, with spot gold climbing more than 2%.
While the media is mainly focused on Venezuela, the broader market reaction has been relatively measured. Oil-linked names with specific ties to the region are leading the charge, notably Chevron (CVX) , which is jumping about 8% in early trading.
The Long Road for Energy
Despite having the largest proven reserves on the planet, Venezuela's infrastructure is in significant disrepair. It will likely take years of capital investment to increase production by a sizable amount. Furthermore, the country primarily produces heavy crude, which is essential for diesel and industrial applications but requires complex refining.
The geopolitical ramifications for China, Russia, and the Middle East are immense, but new market themes will take time to develop. In the meantime, investors are quickly shifting focus back to the upcoming Federal Reserve meeting and the unofficial start of the Q4 earnings season. The mood is upbeat and positive and that should provide a boost to speculative trading.
A Messy New Year Transition
The AI sector is also attracting renewed interest Monday after some "choppy and sloppy" action on Friday. Trading around the turn of the year is notoriously difficult because much of the price action is driven by tax-loss harvesting and year-end positioning rather than fundamentals or technical setups. The "randomness" of these short time frames makes intraday volatility extremely difficult to navigate, and technical patterns often lose their reliability.
My Game Plan
The early days of January are often positive as fund managers try to "get a jump" on the year and build early performance. My strategy is to sharpen the watch list and initiate small positions in new names. While I feel confident in my current holdings, I will be adjusting position sizes as conditions evolve. I plan to be more aggressive with select names as their earnings dates approach.
The mood is upbeat this Monday morning, but the question remains: Do buyers have enough "juice" to deliver that 0.75% gain and save the Santa Claus rally at the final bell?
At the time of publication, Rev Shark had no positions in any securities mentioned.
