The weekend before Memorial Day will mark the unofficial beginning of summer. The markets have historically been relatively flat going into the “summer doldrums.” However, the DOW has been up ~50% of the time in the weeks that follow the holiday while the S&P and NASDAQ have been up ~60% of the time. Let’s break it down even further.
Dow Jones Industrial Avg
- Tues after Memorial Day – Avg loss of -.01%, Best of +4.69% in 1962, Worst of -5.75% in 1932
- 1 Week after Memorial Day – Avg gain of +.41%, Best of +10.76% in 1970, Worst of -7.60% in 1932
- 1 Month after Memorial Day – Avg gain of +.39%, Best of +22.94% in 1938, Worst of -18.95% in 1930
S&P 500
- Tues after Memorial Day – Avg loss of -.01%, Best of +4.65% in 1962, Worst of -7.45% in 1932
- 1 Week after Memorial Day – Avg gain of +.55%, Best of +10.80% in 1970, Worst of -8.96% in 1932
- 1 Month after Memorial Day – Avg gain of +1.12%, Best of +22.98% in 1938, Worst of -17.39% in 1930
Nasdaq Composite
- Tues after Memorial Day – Avg gain of +.03%, Best of +7.93% in 2000, Worst of -3.35% in 2001
- 1 Week after Memorial Day – Avg gain of +.89%, Best of +19.24% in 2000, Worst of -5.95% in 2002
- 1 Month after Memorial Day – Avg gain of +1.04%, Best of +20.97% in 2000, Worst of -12.18% in 2002
Jay Kaeppel, in his brand new book entitled SEASONAL STOCK MARKET TRENDS: THE DEFINITIVE GUIDE TO CALENDAR BASED STOCK MARKET TRADING, discusses the best holiday trading days and finds that the day before the holiday was the best performer for Good Friday, Independence Day, and Labor Day, and Memorial Day (56). In fact, if you were to have started with an initial investment of $1000.00 in 1933 and only invested that money every year around Memorial Day here are the returns:
3 Days Before: + 1.2%
2 Days Before: – 10.4%
1 Day Before: +16%
1 Day After: – 5.7%
2 Days After: + 3.3%
3 Days After: + 3.8%
As with any market forecast, historical numbers surrounding certain days of the year are to be treated as just another weapon in the trader’s arsenal when determining current market moves.
We are currently in a market that has rallied since mid March and is approaching levels on the DOW and S&P 500 that could present a turning point (see AFTER A BIG WALL STREET RALLY…). On the other hand, you have a market that is moving up in spite of bad news as money on the sidelines has poured into the market over the last several weeks. Will a move up into Memorial Day be the last one for a while or will we have a summer rally? In this market anything is possible.
“Tell me and I’ll forget: show me and I may remember; involve me and I’ll understand.” CONFUCIUS
