Traders Counting on Santa Claus Rally

11/17/2011 7:00 am EST

Focus: STRATEGIES

Tim Bourquin

Co-Founder, The Traders Expo and The Futures & Forex Expo

The 2011 Las Vegas Traders Expo kicked off yesterday, and based on this year’s informal sentiment survey results, traders are counting on a year-end rally in the stock market.

Hundreds of active traders completed the traditional sentiment survey which asks simple questions about where various markets will be in the final days of 2011.

When asked if the S&P 500 will rise between now and December 31, 2011, nearly 50% of respondents answered they were “somewhat bullish.” 29% believe the markets will “remain about the same,” while just under 20% classified themselves as “somewhat bearish.”

Q: Between now and December 31, 2011, I think the Standard & Poor’s 500 average will:

chart
Click to Enlarge

Traders were also asked if they would be making more or fewer trades between now and the end of the year compared to this time last year. Just over 43% of respondents stated they would make about the same number of trades as last year, and 33% stated they would trade more actively in the final months of 2011.

Q: For the remainder of 2011, in terms of number of trades, I expect that I will:

chart
Click to Enlarge

While the majority of respondents were bullish on the overall outlook for the markets, their short-term nature is reflected in the fact that only 26% of respondents stated that none of their trades would be short sales. The remaining 74% stated that at least some of their trades would be short sales.

MoneyShow.com has seen this number increase steadily over the years as active traders become more comfortable playing the market from both the long and short side.

Q: From now until December 31, 2011, I estimate the percentage of my traders that will be SHORT sales will be:

chart
Click to Enlarge

Equity trading continues to be the most popular security to trade, with options right behind and increasingly popular from year-to-year. Traders continue to diversify in the markets they trade, finding profitable opportunities wherever volatility is present.

Q: For the remainder of 2011, I expect that my most profitable trades will be in:

chart
Click to Enlarge

A whopping 93% of respondents believe the Federal Reserve will take no action to move interest rates between now and the end of 2011.

Q: For the remainder of 2011, I expect the Federal Reserve will:

chart
Click to Enlarge

When asked if they believed they would make more or less money trading in 2011 than in 2010, nearly 45% stated they would be more profitable this year. For short-term traders, volatility means opportunity, and the markets saw plenty of movement in 2011.

Q: For 2011, I expect my trading profits to be:

chart
Click to Enlarge

Trader sentiment surrounding the value of the US dollar relative to other currencies was somewhat surprising with just over 45% stating they believed the dollar would rise in value. 37% stated the value of the US dollar would remain the same.

With debt crisis troubles in Europe fresh on the minds of the respondents, they continue to believe the US dollar is the safe haven reserve currency of the world.

Q: For the remainder of 211, I expect the US dollar, in relation to other currencies to:

chart
Click to Enlarge

We then asked traders to weigh on in where they felt two important commodities would be by the end of 2011―gold and crude oil.

While more traders (60%) felt gold would rise in value in the final weeks of 2011, a strong 46% of respondents felt crude oil would also increase in price. Are these the first signs of inflation weighing on the trading decisions of short-term traders?

Q: From now until December 31, 2011, I think the price of gold will:

chart
Click to Enlarge

Q: From now until December 31, 2011 I think the price of crude oil will:

chart
Click to Enlarge

Finally, while short-term traders rarely concern themselves with thoughts of the overall health of the economy when making rapid trading decisions, we thought it would be interesting to ask the question. Almost 60% of traders who completed the sentiment survey believe the economy will remain about the same.

Q: For the remainder of 2011, I expect the overall economy to:

chart
Click to Enlarge

Overall, traders see uptrends in the markets and are looking for short-term―even intraday―opportunities to play the market for profit. A Santa Claus rally would certainly help those profits roll in prior to New Year’s Day 2012.

Tim Bourquin is the Trading Content Editor at MoneyShow.com.

Related Articles on STRATEGIES