Has The Santa Claus Rally Begun?

Well its doubtful with most retailers likely to receive a lump of coal in their stocking for Christmas. Most investors would just be happy to see their investments stop falling as many a 401k has turned into a 201k. The Market has rallied hard both Friday and into Monday as traders are hoping the dark days of fall are behind them.

The popular Santa Claus rally and the old saying, “buy when it snows and sell when it goes” are giving hope to many but the economic problems are not over. This is still a market to be very careful in, as we have seen the drops have been quick and rapid. Its no time to be on margin or in stocks that you do not consider to have a solid long term future. Momentum investing is dead! Stay with long term companies that have a strong dividend history and are proven survivors. At least that way you can be paid to wait. Hedging your bets is also something you might consider, writing cover calls that are out of the money can pay you to wait while you hold your stocks.

Its hard to recognize if were are just in the eye of the hurricane or have levelled off. There is going to be a lot of information coming out over the next 6 months, however much of the bad news is priced in as witnessed by Fridays market rally despite lousy housing and foreclosure stats