History shows that holiday trading favors the bulls: Morning short

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Friday, November 25, 2022

By today’s newsletter Jared Blickre, a reporter focused on the markets at Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go Yahoo Finance Software.

Bargain hunters rise and shine!

For tryptophan addicts no A half-day of potential “deals” awaits the stock market as it rushes toward the phalanx of Black Friday deals.

Yes, volume is expected to be low, and volatility has already left highs for the year heading into the holiday.

But the shortened Black Friday session has provided some opportunities for investors looking to get close to the market table over the years.

SAN JOSE, CA – NOVEMBER 26: Black Friday shoppers are seen in the reflection of a store window as they walk through the Westfield Oakridge mall on Friday, November 26, 2021 in San Jose, California. (Photo by Dai Sugano/Mercury News via MediaNews Group/Getty Images)

Just last year, the post-Thanksgiving session witnessed the Dow having its worst day of the year as a new COVID variant called omicron entered the scene for the first time. WTI crude fell 13% that Friday — the biggest drop since negative trading in the early days of the pandemic.

If we rewind the markets’ clock to Thanksgiving 2009, when the world was still reeling from the Global Financial Crisis, we find more volatility.

On the morning of early Black Friday 2009, risk markets sold off sharply as a deal to bail out Dubai’s sovereign debt hung in the balance. US stock futures fell 2% as European trading began. But the eleventh-hour deal whetted investors’ appetite for risk. The day closed green and would not revisit lower levels for more than two months.

And back in 2014, an unexpected deal from OPEC to keep oil production levels unchanged sent oil prices to multi-year lows during the Thanksgiving and Black Friday trading sessions.

To be fair, the big price action on these Fridays is overkill. Norm is a low-volume, low-range day that is part of a larger, bullish seasonality heading into February.

Jeff Hirsch at The Stock Trader’s Almanac has been writing about these trends for decades. (His father, Yale Hirsch, first discovered and wrote about The Santa Claus Rally in 1972.)

Hirsch found November through January to be “the best consecutive three-month period of the year.” This year, that period also falls in what Hirsch calls the “sweet spot” of the four-year presidential term — from the fourth quarter of the midterm year to the second quarter of the pre-election year.

Putting it all together, here are the statistics for a long stretch of trading that stretches from the Tuesday before Thanksgiving to the second trading day of the new year.

Since 1950, the S&P 500 has returned 2.65%, with an average gain of 2.40% over that period. In the medium term the winner period, the index rose an average of 3.78% and fell 2.01% when the market fell. The average gain for the Russell 2000 is 3.38% and the average return is 3.57%; during the average winning period the index gains 4.98% and during the average losing period it loses 2.69%.

During this period, the S&P 500 sports a 80.6% return, while the Russell 2000 sports a 79.1% return. Not bad for bulls looking for solace in this year’s market.

Hirsch notes that this is an unusual year given the 15.5% decline seen for the S&P 500 this year. While the major indexes are unlikely to retrace their losses so far this year, the bullish season is still in place.

As Hirsch writes: “The fact that November 2022 is so far supports the bullish continuation.”

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