Optimism for a Santa Claus Rally

Investing.com — Despite recent market turbulence, analysts at Stock Trader's Almanac remain optimistic about the potential for a Santa Claus rally.

The sentiment follows the Dow Jones Industrial Average's (DJIA) longest losing streak since October 1974, which ended yesterday.

"Historically, it took DJIA around 50 trading days to recover the losses accumulated during past streaks," the analysts noted.

They emphasized that after similar losing streaks, the DJIA historically trended higher.

The firm explains that one week, two weeks, and one month after such streaks ended, the index was up 72.7% of the time. Three months later, the index was higher 81.8% of the time, with an average gain of 5.8% and a median advance of 7.59%.

The report also highlighted only two instances where the market was down three months post-streak: in 1960 during Cold War tensions and in 1941 amid the global upheaval of World War II.

"Odds still suggest we are in store for a Santa Claus Rally and the continuation of the bull market," the analysts stated.

After a year of solid market gains, recent profit-taking and cautious sentiment may be a natural reset, they argued.

"A bout of profit taking and a little fear is understandable and perhaps a healthy removal of some of the froth in the market and sentiment," they explained.

Overall, the analysts believe the market's broader bullish momentum could resume, providing a promising outlook for investors heading into the new year.