Can Stocks Buck MLK Week's Bearish History?

The S&P 500 Index (SPX) tends to underperform during MLK week

by Elizabeth Harrow

Published on Jan 15, 2016 at 2:00 PM

Next week is a short one for most of us here in the U.S., with Monday set aside to observe Martin Luther King, Jr. Day. Today's massive sell-off suggests that, with oil prices tanking and China entering a bear market, most traders are unwilling to leave any cash on the table ahead of the long weekend -- but what can we expect from stocks after the holiday?

Stock markets have been closing in honor of MLK Day since 1988. Since then, the post-holiday week has tended to underperform other weeks of the year, according to data compiled by Schaeffer's Senior Quantitative Analyst Rocky White.

Per the first table below, the average "anytime" weekly return for the S&P 500 Index (SPX) is a gain of 0.13%, but that drops to a loss of 0.73% during MLK week. Returns are only 38.9% positive, compared to 55.7% during the rest of the year.

However, it's worth noting that three of the past four MLK weeks have been positive, including a 2.04% bounce in 2012 (shown in the second table below). Plus, next week could actually bring traders a bit of a break from volatility. The standard deviation during MLK week is 1.89%, compared to 2.54% during other weeks.

160115 MLK week SPX returns


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