US Stocks: A Potential Seasonal Headwind for MLK Week Amidst Key Earnings Reports
Matt Weller, CFA, CMT January 20, 2020 12:36 PM
The average and median returns for all the major US indices are negative for this week...
As anyone trading US stocks, indices, or bonds has probably realized by now, the markets are closed today for the Martin Luther King (MLK) Day holiday.
While certain states and cities began to honor the civil rights activist starting in 1971, MLK Day was not an official federal holiday until 1986, and it wasn’t recognized with a market closure by the NYSE until 1998. That said, we still have more than 20 years of data on US stock markets’ performance in the shortened holiday week, and the picture is not pretty:
Source: Stock Traders Almanac
As the chart above shows, the average and median returns for all the major US indices are negative for this week, with no index rising more than half the time. That said, the figures have been more bullish since we’ve been in the more recent bull market, with most of the major indices (including the DJIA, Nasdaq, and Russell 2000) rising in six of the past eight years.
Of course, the full 22 period sample is a bit light to draw any firm conclusions, but we wanted to make readers aware of a potential seasonal headwind, especially with many US indices deep in “overbought” territory following the big rally over the past few weeks. Traders should keep a close eye on major companies reporting earnings this week, including Netflix (Tuesday), Procter and Gamble (Thursday), Intel (Thursday), and American Express (Friday).
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.