Daily Commentary - Posted on Friday, January 13, 2012, 9:03 PM GMT +1
Martin Luther King, Jr. Day and Week
Next week will be the week including Martin Luther King, Jr. Day, a United States federal holiday and an exchange holiday since 1998 (observed on the third Monday of January).
From a seasonal perspective, the week including Martin Luther King, Jr. Day favors the bears (but the good news follow suit, see the second part of the posting below). Table I below shows the SPY‘s (S&P 500 SPDR) performance (since 1998) during Martin Luther King, Jr. week (‘4 sessions later‘ equals ‘by the end of the week‘) assumed one went long on close of the final session of the week immediately preceding Martin Luther King, Jr. Day (in this event on Friday, January 13).
The SPY closed out Martin Luther King, Jr. week with a loss in 10 out of 14 years, an closed higher 1.0%+ only once, but lower 1.0%+ in 7 years. In addition, the SPY posted a least one lower close in 13 out of the last 14 years.
(click on image to enlarge)
At time of writing (2:40 pm ET), the S&P 500 is still up week-to-date, and up ≥ 1.25% month-to-date on the session immediately preceding the third Monday of January (Martin Luther King, Jr. Day since 1998).
Assumed that will not change (to the worse) into today’s close, this will have significantly positive implications for the remainder of the month.
Table II below shows the S&P 500′s performance (since 1950) over the remainder of the month (on the session immediately following Martin Luther King, Jr. Day, until the end of the next week, until the end of the then following two weeks, and until the end of January) in the event one went long on close of the session immediately preceding the third Monday in January where the S&P 500 had closed out the week with a gain, at the same time up ≥ 1.25% month-to-date as well.
The S&P 500 closed at a higher level at the end of the then following week (in this event on Friday, January 27) and at the end of January on more than 3 out of every 4 occurrences (or ≥ 75% of the time), but especially remarkable is the fact that the S&P 500 up to now never lost 1.0%+ until the end of January, but gained 1.0%+ on 15 occurrences (when the S&P 500 had performed positively in the first half of January in the past, it regularly had remained firm during the second part as well).
(click on image to enlarge)
Seasonals are confirming the bearish bias going into effect at today’s close (see SPX at Multi Month High before OpEx), but to the same degree confirming the assumption that a pull back might be short lived (and lower prices during the next week will probably provide a buying opportunity), and major market indices are supposed to bounce back and continue higher over the remainder of the month.
Have a profitable week, and enjoy your holiday
Disclosure: No position in the securities mentioned in this post at time of writing.
Remarks: Due to their conceptual scope – and if not explicitly stated otherwise – , all models/setups/strategies do not account for slippage, fees and transaction costs, do not account for return on cash and/or interest on margin, do not use position sizing (e.g. Kelly, optimal f) – they’re always ‘all in‘ – , do not use leverage (e.g. leveraged ETFs), do not utilize any kind of abnormal market filter (e.g. during market phases with extremely elevated volatility), do not use intraday buy/sell stops (end-of-day prices only), and models/setups/strategies are not ‘adaptive‘ (do not adjust to the ongoing changes in market conditions like bull and bear markets). Index data (e.g. S&P 500 cash index) does not account for dividend and cash payments.
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