HUDSON: It turns out there is a Santa Claus and he visited Wall Street at the end of the year. Over the past five trading sessions of last year and then the first two of this year, the S&P 500 is up more than 1 percent, the so- called Santa Claus rally. Tonight`s “Street Critique” guest keeps track of these types of market phenomena. Jeffrey Hirsch is the editor-in-chief of the “Stock Traders Almanac” with us tonight from the NASDAQ. Jeff, happy New Year, welcome to the program.
JEFFREY HIRSCH, EDITOR-IN-CHIEF, STOCK TRADER`S ALMANAC: Happy new year to you too. Thanks for having me.
HUDSON: What kind of predictions can we draw for 2012 due to the visitation of Santa Claus?
HIRSCH: Actually Santa showed up on the first trading day of the New
Year and it`s the beginning, the first positive sign of the year. And it`s a bit of sigh of relief but there are several indicators we will be looking at. The first five days is the January barometer. But generally when Santa Claus shows up on Wall Street, we get that rally over a seven-day period. It`s a good sign that bullish forces, seasonal forces are being allowed to permeate and any negatives out there aren`t necessarily as bad as they might have been.
HUDSON: Jeff, what do we expect usually after a flat year and more
so after a flat year for the markets into an election year?
HIRSCH: Well you know, this has only happened about 11 times since
the S&P started. The following years have been much more positive than you`d expect. There`s been some big years and only two nasty losses, so it doesn`t really imply anything negative even during the election year. So we`re not concerned. You don`t really have back to back flat years. And most of the time it`s followed by about eight of the 11 times by positive years. So we`re looking for that not to be a factor.
HUDSON: Sounds like some pretty good odds then for 2012 are for some
stock gains. You like the energy sector overall, the S&P energy sector exchange-traded fund (NYSEARCA:XLE) XLE around $70 per share. Why do you like energy stocks?
HIRSCH: Well you know, if the global economy is as bad as everyone
says it is and there`s so much trouble out there and oil`s already really high, what happens when the global economy demand picks up a little bit and/or something, you know, sinister happens in Iran or something in a hot oil spot. I think that would push it up higher. And I think the energy needs of the planet are still increasing. It`s just a bit of a lull.
HUDSON: So that`s kind of the oil trade on energy. You even like nat
gas specifically and you`re peeling that off with the First Trust Natural Gas Index Fund (NYSEARCA:FCG) , again an exchange-traded fund, the ticker here FCG. Nat gas supplies we know are at record level. Demand has been muted because of the mild winter weather at least before this week.
HIRSCH: It`s been down for a long, long time and you know, I think
there`s also some pick up there, demand especially if oil goes up, people switch over to natural gas. And it`s just so cheap and it`s been down so long that I think the longer-term prospects especially for this year are good. It`s also, both of these are in the seasonal bullish period. Oil starts in December and goes through July and natural gas picks up in February. We`ll be looking to get into that and any sort of dip and that runs into June. You`re looking at the heating and cooling season and the driving season.
HUDSON: Speaking of which here, Jeff do you have positions yourself in these two ETF`s?
HIRSCH: I do own both of those in my personal portfolio.
HUDSON: And to our viewers, you can email us, contact us all the time at firstname.lastname@example.org. Our guest this evening is Jeff Hirsch with the “Stock Traders Almanac.”