Last night’s subscriber letter featured (an expanded version of) the following study, which looks at performance in the 1st couple of days following a positive 1st day of a new year.

The stats and curve all suggest some immediate follow-through has been typical. There have now been 10 winners in a row, with the last loser occurring in 1998. Also notable is that 26 of the 28 instances (93%) closed higher than the entry price on either day 1 or day 2. Interestingly, the 2 instances that didn’t, also didn’t manage to post a close above the entry price at any point during the rest of the month. Of course AAPL has already put the market in a bit of a hole, with SPY prepping to gap down over 1% as I type this.  So it may be more of a challenge to close up today or tomorrow than usual.

It is also notable that many instances saw a mid-month decline after the initial bounce, but that has not played out in recent times.

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In the subscriber letter over the weekend (and for the last several years) I showed some studies that examined market performance in the last 15 minutes of trading for the year. The table below is from those studies – also seen here on the blog in 2015. Stats are updated and it shows all “last 15 minutes” from 1998 – 2017.

The average trade has seen SPY drop over 0.2%, and the average losing trade has seen it close down 0.32%. That’s a sizable average move for a 15-minute period. Three of the last six years have bucked the trend and closed up. Prior to that the results were extremely bearish. Wishing you a happy and prosperous 2019!

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Over several time horizons op-ex week in December has been the most bullish week of the year for the SPX. The positive seasonality actually has persisted for up to 3 weeks. I’ve shown the study below in the blog many times since 2008. It looks back to 1984, which was the first year that SPX options traded. The table is updated again this year.

The stats are extremely strong. This year I also decided to throw in the 5-day equity curve.

The 2 sizable dips you see were 2000 and 2011. And even with those shown, it is a very persistent move higher. Price action has been tough lately, but the bulls should have seasonality on their side next week.

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The time around Thanksgiving has shown some strong tendencies over the years – both bullish and bearish. I have discussed them a number of times over the years. In the updated table below I show SPX performance results based on the day of the week around Thanksgiving. The bottom row is the Monday of Thanksgiving week. The top row is the Monday after Thanksgiving.

Monday and Tuesday of Thanksgiving week do not show a strong, consistent edge. But the data for both Wednesday and Friday looks quite strong. Both of those days have seen the S&P 500 rise over 70% of the time between 1960 – 2017. The average instance managed to gain about 0.3% for each of the 2 days. (This is shown in the Avg Profit/Loss column where $300 would equal a 0.3% gain.) That is a hearty 1-day move. Meanwhile, the Monday after Thanksgiving has given back over half the gains that the previous 2 days accumulated. It has declined 66% of the time and the average Monday after Thanksgiving saw a net loss of 0.37%.

Of course I am not the first person to notice this. Strong Thanksgiving seasonality has been noted by many analysts over the years. So one (valid) concern that traders have with well-known seasonal tendencies is that they can be easily front-run. If people know there is a good chance that the market will rise Wednesday through Friday, they will look to get long on Tuesday. And if all the people buy ahead of the bullish period, then that may either dilute or eliminate the seasonal edge.

From 1960 – 1986 someone who bought Tuesday’s close and sold Friday’s close would have seen the SPX decline only 1 time. But from 1987 – 2017 there were 8 instances where SPX did not close higher on Friday than it did on Tuesday. So perhaps the edge became so well known that it was diluted by front-running.

To determine whether the Wednesday – Friday Thanksgiving edge may have been front-run a particular year, you could examine price action. I have repeatedly found that a market that is oversold going into a strong seasonal period will perform better than a market that is overbought going into a strong seasonal period. A very simple metric that could be used in this case would be to see whether the market closed in the top or bottom half of its intraday range on Tuesday of Thanksgiving week. To do this I used SPY instead of SPX, because it had better intraday data.

Since 1993, I found that years in which SPY closed in the top half of its intraday range on Thanksgiving Tuesday posted a 9-5 record from Tuesday’s close to Friday’s close. When SPY closed in the bottom half of its range on Tuesday the performance over Wednesday to Friday was 10-1. And the average instance posted a 0.8% gain these years versus a 0.1% average gain the other years. So Tuesday’s action appears worth watching as we approach this potentially seasonally bullish period.

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Today I decided to look at SPX performance following past mid-term elections. I did not find much that suggested a strong edge. Below is a look at results since 1970 following mid-term elections.

The numbers suggest perhaps a mild inclination for the market to “celebrate” the results on Wednesday. After that there does not appear to be a strong tendency in either direction. Below are the 1-day instances listed out for those that are interested.

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With the calendar moving from October to November, it has now entered its “Best 6 Months”. The “Best 6 Months” tendency was first published by Yale Hirsch, founder of the Stock Trader’s Almanac, in 1986. The concept behind the “Best 6 Months” is simple. Seasonality suggests that over the last several decades the market has made a massive portion of its gains between November and April. And during the remaining 6 months, it has generally struggled to make headway.

Additionally, the market shifted into the 3rd year of the Presidential cycle. Here at Quantifiable Edges we measure the Presidential Cycle years from November – October rather than January – December. That allows the cycle years to better match up with the elections, which take place in early November. It also makes for easy evaluation when combining it with the “Best 6 Months” cycles. The 3rd year of the Presidential Cycle has been a strong one.

When the Best 6 Months and the 3rd Year of the Presidential Cycle have been active at the same time, the results since 1960 have been outstanding. In the table below I have listed out each instance.

All 14 instances since 1960 have shown gains. Of course there have been drawdowns along the way. The 1974-75 period saw SPX pull back 13.2% from its October closing price before rebounding and finishing April 18.1% above the October closing price. And in 2002-03 there was a 10.85% drawdown from the October close before finishing April 3.5% above it. But overall the stats have been incredibly lopsided. The average 6-month period saw a net gain of 15.5%. The average run-up (from the October close) was 17.7% and the average drawdown just 3.1%. Long-term seasonality does not get any better.

Much more information is available on these indicators in the Quantifiable Edges Market Timing Course. (Get 30% off with the coupon code “November” between now and Monday, 11/5.) Also included in the course are price-based indicators that combine very well with the seasonals, along with possible long-term approaches to utilizing different combinations of price and seasonality. Code, supporting spreadsheets, and access to pages with indicator updates are also included in the course.

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