Alright, well some of you probably don’t think of Labor Day as being all that “thrilling.” But pretty much anytime you can get a day off that’s pretty thrilling in and of itself. Of course that sentence only applies to that diminishing group of individuals who actually hold a job. And Lord knows those people could use a day off. In today’s “interesting times” there appear to be two primary groups of people:
-Those who cannot find work
-Those who are overworked.
There doesn’t seem to be a whole heck of a lot in between.
So this time around Labor Day offers us a great opportunity to join together as one people and, er, well, um, call each other names and argue about which should get priority – a debate that resembles something along the lines of the hairs on Medusa’s head all talking at once or Big Speech #3,426. Not a lot to choose from there. So rather than tiptoeing around such depressing topics as unemployment and words from people who claim to know what to do about it (with scant evidence to back it up), let’s go straight into the ditch to something potentially even more depressing – the prospects for the stock market for the rest of the month of September.
First the Good News
As I highlighted in my MoneySteps (www.MoneySteps.com) update for 9/1, the month of September in the stock markets tends to have something of a Jekyll and Hyde nature to it. The good news (typically, apparently not this time around) is that the six trading day period around each major market holiday (which is comprised of the three trading days before and the three trading days after each holiday) has a tendency to be bullish. This is pretty much true regardless of which holiday one is looking at. To wit, Figure 1 displays the growth of $1,000 invested in the Dow Jones Industrials Average only during the three trading days before and after each holiday since 1933 versus all other trading days.
Figure 1 – Growth of $1,000 invested in Dow during three days before and three days after every market holiday (blue line) since December 1934 versus all other trading days (red line)
As you can see, while nothing is ever perfect – and again, this year’s pre and post Labor Day performance has been none too pretty - the long term trend has been solidly bullish. In fact it is interesting to note the following:
-$1,000 invested only during the 6-day holiday period (roughly 50 to 55 trading days per year) grew to $17,790 since 1933 in a total of only 3,705 trading days.
-$1,000 invested only during all other trading days only grew to $6,325 during 16,611 trading days.
Figure 2 displays the growth of $1,000 invested only during the six days surrounding each Labor Day holiday since 1933.
Figure 2 - Growth of $1,000 invested in the Dow during three days before and three days after every Labor Day holiday since December 1934
As you can see, overall the trend has been bullish. On the other hand, things have ”flattened out” a bit in recent decades (and this year was has been no great shakes so far).
Now the Bad News
Once the “typically favorable” Labor Day Holiday period is out of the way, things can get a little dicey. To illustrate this trend we will place all September trading days since 1933 in one of two categories:
Category 1 – September days that are within 3 trading days of Labor Day (either before or after)
Category 2 – All other September trading days.
To better understand this let’s consider this year. September 1 and 2 are the two trading days before Labor Day and Tuesday through Thursday September 6 through 8, are the three trading days after Labor Day. So these days all fall into Category 1. All the trading days of September after that fall into Category 2. Why does this matter? Consider Figure 3.
The blue line displays the growth of $1,000 invested only during Category 1 days. All told, these days have shown a net gain of +24.1% since 1933.
The red line displays the growth of $1,000 invested only during Category 2 day. All told, these days have shown a fairly stunning net loss of -51.2% since 1933.
Figure 3 – Growth of $1,000 invested during Category 1 days (blue line) versus Category 2 days (red line) since 1934
Summary
So is it preordained that the stock market will fall between the close on September 8th and the end of the month? Not at all. Figure 4 summarizes the history of holiday and post-holiday trading days during the month of September since 1933.
|
Measure
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September Holiday Days
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September Post-Holiday Days
|
|
# Times Up
|
45
|
30
|
|
# Times Down
|
32
|
77
|
|
% Time Up
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58%
|
39%
|
|
% Time Down
|
42%
|
61%
|
|
Largest % Gain
|
+10.3%
|
+6.9%
|
|
Largest % Loss
|
(-4.4%)
|
(-10.1%)
|
|
Average % Gain/Loss
|
+0.35%
|
(-0.86%)
|
|
Median % Gain/Loss
|
+0.63%
|
(-0.74%)
|
Figure 4 – Summary of September Performance
As you can see, the “post holiday” period during the month of September has showed a gain 39% of the time. So it is not like this period shows a loss year in and year out. Still, the red line displayed in Figure 3 suggests that a little bit of caution might be warranted between now and the end of the month when we get into the slightly more “favorable” month of October. Or as it is also known – “Crash Month”
We do indeed live in interesting times.
Jay Kaeppel
Staff Writer and Author of “Seasonal Stock Market Trends”
Optionetics.com ~ You’re Options Education Site
NOTES:
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