Why This Summer Could Begin on a Bullish Note

The S&P 500 Index (SPX) has historically performed well in the week following Memorial Day

Senior Quantitative Analyst
May 20, 2015 at 7:40 AM
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Next Monday is Memorial Day. That means a three-day weekend for the markets and a short trading week next week. Historically, this coming week has tended to be bullish for the S&P 500 Index (SPX) when looking at the data since 1990.

The upcoming holiday week has averaged a gain of 0.59% since then, compared to a 0.17% gain in other weeks. This is despite the fact that four of the last five Memorial Day weeks have been negative (last year the S&P 500 gained 1.2% during the week, and the prior four years, the index was down). Another bullish tendency from the table below is that big moves seem to happen more to the upside than the downside, as the average positive is greater in magnitude than the average negative. Also, the average negative is smaller (in magnitude) during Memorial Day week than other weeks.

SPX Weekly Returns Since 1990

Daily Returns for Memorial Day Week: The table below summarizes daily S&P 500 returns for the Friday before the long weekend through the end of the holiday week. Interestingly, the day before the long weekend has been quite bearish, averaging a small loss and down more than half the time. Thursday of Memorial Day week has been the best day, averaging a gain of 0.35% and positive 72% of the time. 

SPX Memorial Day Week Returns

Weekend Volatility: This next table shows daily S&P 500 return data depending on the number of days in between trading days. Using standard deviation of the returns, the longer weekend will lead to more volatility. That makes sense since there's an extra day of news to price into the market once it begins trading again. The average positive and negative shows that when the market increases, it's up more than usual, and when it decreases, it's down more than usual over a three-day weekend compared to other days. 

SPX Returns Since 1990

I was curious if there were particular stocks that tended to exhibit higher volatility over long weekends compared to typical weekends. To find those particular stocks, I calculated the standard deviation of their moves when there were zero days off between trading days, and compared that to the standard deviations after typical two-day weekends.

I narrowed down the list to only those stocks with more volatility over normal weekends. Then, I found the standard deviations over three-day weekends and only included stocks with higher volatility after the long weekends, compared to the normal weekends. Finally, I sorted the list by taking the ratio of the standard deviation of returns after long weekends to the standard deviations of typical trading days (zero trading days in between). I know that is hard to follow, but the bottom line is this is a list of 30 stocks which tend to make big moves in either direction after long weekends.

30 High-Volatility Stocks


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