After a very volatile week, Father Christmas finally drove his sleigh through the oil-driven stock market anxiety to give us a really good look at what we call a Santa Claus rally. Wednesday brought a 288-point spike in the Dow, followed by a whopping 421-point surge that our market just couldn't ignore.
Our market went up 127 points to close at 5338.60, which was a lot better than the ridiculous levels we saw earlier in the week. Sure, our market is vulnerable, with a near perfect storm explaining why our market fell so hard this week. Let's list the reasons:
- Oil prices kept falling, broaching $US60 a barrel.
- Iron prices still under pressure.
- Economic readings from China and Europe have not been encouraging.
- Our dollar looks set to fall to 75 US cents after the RBA Governor Glenn Stevens gave us his economic wish list, which encouraged foreign shareholders to dump our stocks in the short-term.
- Wall Street started to join the oil price pity party and that really got the Nervous Nellies knee knocking!
- As I explained last week, in the US as the tax year ends, stocks get sold off so investors can use the capital losses to offset capital gains. They often then buy the stocks back, which explains the spike back on Wall Street towards the end of the week.
But this week proves a few things. First is we have to expect volatility in 2015. Second, big dips remain buying opportunities and third, I believe next year will be better for stocks than this year.