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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Holiday Research

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As of 11/20/2017
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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

This article studies how price behaves before and after stock market holidays. Updated 8/9/2017 using data from January 1995 to August 2017.

 

Holiday Research Summary

Based on updated results detailed below, the bull market closes higher 75% of the time (6 of 8 contests) the day before and the day after most market holidays. In a bear market, the results reverse with 75% closing lower the day before a market holiday, but half close higher a day after the holiday.

The best bull market results are the day after labor day (price closes higher 60.9% of the time). The day before New Years shows price closing lower 60% of the time (that is price, price closes higher just 40% of the time).

In a bear market, Memorial Day sees price close lower most often a day before the holiday (72.2% close lower, 27.8% close higher). Christmas also sees price close higher the day before the holiday (67.9% of the time). The day after thanksgiving sees price close higher more often (78%) than any other holiday, regardless of a bull or bear market.

Holiday Research Background and Methodology

I received an email saying that the market before labor day climbed, and it was a bad time to short stocks. I decided to test whether or not that was true for all market holidays.

When does the market close for a holiday? That was easy to find out, and here is the table

  • New Years day (January 1)
  • Martin Luther King jr (third Monday in January)
  • Washington's birthday/President's day (third Monday in February)
  • Good Friday (Friday preceding Easter Sunday)
  • Memorial day (last Monday in May)
  • Independence day (July 4)
  • Labor day (first Monday in September)
  • Thanksgiving (fourth Thursday in November)
  • Christmas (December 25)

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I had good definitions on all holidays except for Good Friday. I lost patience wading through religious texts, trying to figure out when the holiday occurred, so that is not included in the test.

I used 509 stocks beginning from January 1, 1995 through August 8, 2017. Not all stocks covered the entire period, but sample counts were high, especially for bull markets.

I measured the close to close price change from the day before the holiday (the close two days before to the day before), which I call pre-holiday, and post-holiday measures from the close the day before the holiday to the day after.

In some cases, the day after the holiday the market is opened only half the day, but I did not concern myself with this nor did I separate out the findings for those holidays that made three day weekends. If you own the stock and it goes up, that's important to know. Whether or not it went up because of a three day recess or a half day's worth of trading is less important than adding bucks to the bank.

I split the results into two periods: bull markets and bear markets. The bear market spans two periods, from March 24, 2000 to October 10, 2002 and October 11, 2007 to March 6, 2009. Those two periods are when the S&P 500 index dropped more than 20%, high to close, before the trend changed (a rise of 20%). Everything outside of those two periods constituted a bull market.

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Holiday Research Results

Using the methodology described above, I captured the number of pre- and post-holiday price changes. The top half of the table shows the changes for bull markets and the lower half describes the results for bear markets.

For example, price closed higher 3,381 times out of 8,458 tries the day before New Years, or 40% of the time. The next trading day, price closed higher 53.1% of the time. Anything below 50% means price closed lower; above 50% means a higher close.

HolidayPre-holiday
samples
Higher
Closes
Pre
Change
Post holiday
samples
Higher
Close
Post
Change
Market
New Year's Day8458338140.0%8459449453.1%Bull
Martin Luther King Jr.8468438851.8%8469433551.2%Bull
Washington's Birthday8483414848.9%8485475756.1%Bull
Memorial Day8590454953.0%8593440151.2%Bull
Independence Day8611461453.6%8613368542.8%Bull
Labor Day8129452655.7%8131495360.9%Bull
Thanksgiving8126465157.2%8127377346.4%Bull
Christmas8131412150.7%8132406750.0%Bull

Bull Market Above, Bear Market Below
New Year's Day182384246.2%182378042.8%Bear
Martin Luther King Jr.182385446.8%182358932.3%Bear
Washington's Birthday182467036.7%182450327.6%Bear
Memorial Day175548827.8%175594553.8%Bear
Independence Day176288750.3%176390251.2%Bear
Labor Day176776243.1%176767438.1%Bear
Thanksgiving181981544.8%1819141878.0%Bear
Christmas1823123867.9%1823113462.2%Bear

Highlighted in red are the days in which price closed lower most often. Highlighted in green are those days with the highest percentage of up closes. The bold day (bull market, Washington's Birthday, 48.9%, pre-holiday) used to be the worst performer when I ran this study the first time (in September 2009). Updated 2017 information shows the worst performer has migrated to New Years (bull market, 40%, pre-holiday).

Holiday Research Conclusion

If you count the number of holidays that price closes higher, you get 6 times (75% of the time) pre-holiday in bull markets and just twice in a bear market (25% of the time). Post holiday, price closes higher 6 times in a bull market (75%) and 4 times in a bear market (50% of the time).

Combining all of the scores, we find that the market closes higher 8 times out of 16 contests or 50% of the time before a holiday and 10/16 or 63% of the time after a holiday. In other words, it's more accurate to say that the market closes higher most often after a holiday but not before.

-- Thomas Bulkowski. Donate now to keep this website free.

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Famous last words: "What happens if you touch these two wires tog"