History shows that holiday trading tends to bullish: the morning briefing

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Friday, November 25, 2022

Today’s newsletter by Jared Blaker, is a market-focused reporter for Yahoo Finance. Follow him on Twitter @employee. Read this and more market news on the go Yahoo finance app.

The Rise and Shine of the Bargain Hunters!

For those who slept off a tryptophan hangover they are Not Kicking off a raft of Black Friday deals so far, half a day awaits potential “deals” in the stock market.

Yes, volume is expected to be low, and volatility has already eased from this year’s highs as the holiday approaches.

But the truncated Black Friday session has presented some opportunities over the years for those investors wanting to step up to the markets table.

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

Just last year, the post-Thanksgiving session saw the Dow suffer its worst day of the year, as a new COVID variant dubbed omicron first entered the scene. WTI fell 13% on Friday – its biggest drop since negative trading in the early days of the pandemic.

If we time the markets back to Thanksgiving 2009, when the world was still reeling from the global financial crisis, we would find plenty of volatility to overcome.

Early on Black Friday morning in 2009, risk markets were selling hard as Dubai’s sovereign debt rescue deal hung in the balance. US stock futures fell 2% as Europe kicked off the trading day. But the 11-hour deal whetted investors’ appetite for risk. The day closed in the green and declines for more than two months will not be revisited.

Back in 2014, a surprise deal by OPEC to keep oil production levels unchanged sent oil prices towards multi-year lows during the Thanksgiving and Black Friday trading sessions.

To be fair, the huge price action on these Fridays is the anomaly. The base is a low volume, low range day that is part of a larger bullish seasonality leading into February.

Jeff Hirsch of 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 three consecutive months of the year”. This year, that period also falls within what Hersh calls the “sweet spot” of the four-year presidential cycle—from the fourth quarter of the midyear through the second quarter of the pre-election year.

Putting them all together, here are the stats for a long haul that stretches from the Tuesday just before Thanksgiving to the second trading day of the new year, which includes the precisely defined Santa Claus Rally.

Since 1950, the S&P 500 has posted an average gain of 2.65% over this period, with an average increase of 2.40%. during the average the win During the period, the index rose by 3.78% and fell by an average of 2.01% when the market was down. For the Russell 2000, the average gain is 3.38% and the average return is 3.57%; During the average winning period, the index gained 4.98% and lost 2.69% during the average losing period.

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

Hirsch points out that this year is unusual given the 15.5% decline the S&P 500 has seen this year so far. And although the major indices are unlikely to recover losses so far this year, the bullish seasonality remains.

As Hirsch wrote: “The fact that November 2022 has been so far supports the continuation of the upside.”

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