US Stocks: A Potential Seasonal Headwind for MLK Week Amidst Key Earnings Reports
Matt Weller, CFA, CMT January 21, 2020 4:36 AM
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).
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.