Odds of a bullish December look good

And so we enter the seasonally bullish month of December – a period that bull traders hope will deliver the traditional Santa Rally and that we have written about in the last edition of our magazine (Link here, page 14 – http://issuu.com/spreadbetmagazine/docs/spreadbet-magazine-v11_generic)

We have been bullish of the FTSE, Japan, China and the Mining sector in recent months and I thought the 3 tables below together with the technical picture overview at the bottom for the FTSE would prove interesting to our readers in assessing whether history is in our side with regards to a positive December. The references below, although relating to the S&P 500 are likely to have positive connotations with the FTSE.

Table (1) below is a measure of the S&P’s monthly returns over the last 30 years – you can see that December is a major outlier in terms of percent returns and probability of positive results

Table (2) below is a measure of the December returns achieved for various percentage levels of bulls from the II survey. The current percent bullish percent? 39% and so just under the key 40% level that has a 100% strike rate.
Table (3) portrays the average returns for the S&P 500 in December for various year to date returns, ie the top table shows that when the S&P has achieved a 10% + return that the S&P achieves a median return of 1.74% in December and is positive 80% of the time.

Looking at the above table we can tick of 3 out of 3 in relation to the picture for the current December and so if history is any guide then the traditional “Santa rally” should deliver!

Finally, below is a chart on the FTSE 100 with my favourite technical signals on (19 & 37 day exponential moving averages, RSI 17 day measure and MACD) – this is one of the most constructively bullish charts that I’ve seen for a while and with 6000 tantalisingly close then I personally think we will see this before the curtain falls on 2012.

A smart way to play the Dec Santa rally is through a potential option strategy that is detailed on page 94 of the latest edition of our mag (link here – http://issuu.com/spreadbetmagazine/docs/spreadbet-magazine-v11_generic). The strategy detailed within the piece offers unlimited upside yet with limited downside and is very cost effective from an outlay perspective. Alternately, at the current level of the FTSE 100 (5866), a Jan 5950 – 6075 Call Spread can be put on for around 40 points – not a bad ticket methinks if the FTSE busts through 6000 over the Xmas New Year period.

If you’d like to learn more about Options Trading in a spread betting capacity then click the image below to receive a free and unique e-guide explaining how to use them.