The Santa Claus rally is just around the corner

For many years, it has been a consistent phenomenon that the year end usually comes with a general market rally. However, this is usually preceded by a severe market selloff in the first half of Dec, followed by a strong market bounce in the last 2 weeks of the year. Last year, this was exactly like that when the market sold off very hard with VIX jumping from 15 to 25 within the first 2 weeks. Then the market went high significantly starting in the mid Dec as if everyone suddenly turned from being very bearish to bullish at the same time.  While the history does not always repeat itself, it often follows the same pattern. I think we may likely witness the same Santa Claus rally this year, following the same SC rally pattern as last year. As I said to friends at the WeChat groups in the last few days that I was expecting S&P should drop hard to 2030 or lower before a perfect SC rally could finally start, we got the hard selloff today and S&P indeed broke down the 2030 level and went down as low as 2008. Today's VIX also jumped hard to 25, which was around 15 just a few days ago. Technically speaking, the market is quite oversold at the moment and is due for a good bounce. Of course, the wild card is the FOMC next Wed when Jen Yellen is expected to announce a rate hike, first in almost 10 years. While it is widely expected and should has already been priced in, the market is still very uneasy about it as it may be worried about some negative surprise in their announcement. But personally I would bet such a surprise, if any, would be more in favor of the market than negative to it. The US economy is still very fragile in its recovery and the world economy is in a total mess. I don't think the FED will be taking any risk to announce something that could be perceived as very negative to the market. Therefore, I'm betting that the 2015 SC rally will occur as well, maybe starting next week, barring any black swan shows off.

Of course, I cannot know if today's hard selloff will mark the bottom before this rally, as there is still a chance some further selloff may occur before the FOMC next Wed. Buying some today as long positions but be willing to buy more early next week if further selloffs indeed happen is my game plan to play with the Santa Claus rally!