Indicator of the Week: Will Stocks Boom After Independence Day?

If history is any indicator, we can expect a boring, but positive, holiday-shortened week

Senior Quantitative Analyst
Jun 29, 2016 at 6:30 AM
facebook twitter linkedin

Monday is July 4, so U.S. stocks and traders get a day off. This week, I'll take a look at how stocks have performed in the past during the Independence Day holiday week. Also, I'll see if there's anything interesting in the individual days leading up to, and immediately after, July 4. 

Fourth of July Week: Looking at the last 50 July 4 holidays takes us back to 1966. Using S&P 500 Index (SPX) data since then, I examined how stocks have performed during the holiday week, in comparison to other weeks. In a nutshell, stocks have done quite well for the week of July 4.

The SPX averages a gain of 0.35%, which is more than twice the average return of other weeks. I also found that 60% of holiday weeks have been positive, compared to 55.5% of other weeks. Not surprisingly, the July 4 week has significantly less volatility than other weeks. This is apparent in the standard deviation data. In addition, the average positive and negative returns are both less in magnitude when compared to other weeks. If history is any indicator, we can expect a boring, but positive, week next week. 

Chart 1 SPX Weekly Returns Since 1966

This year, July 4 lands on a Monday. I wondered whether or not the day of the week that traders have off made a difference in market results. The table below breaks down the last 50 July 4 holiday weeks depending on which day traders were off. The good news is that when the holiday occurs on a Monday, the SPX has performed the best, averaging a 0.81% gain for the week, and ending in the positive range over 70% of the time. Stocks performed the worst when the holiday occurred in the middle of the week. 

Chart 2 SPX July 4 Weeks Since 1966

Days Surrounding July 4: The table below shows how the SPX has performed over the past 50 years in the days before and after the July 4. I bolded some of the numbers I found interesting. The session before the 4th (Friday of this week) typically shows some outperformance, averaging a 0.09% gain, and positive 56% of the time. The first day back after the holiday (next Tuesday) tends to show underperformance, averaging a loss of 0.15%, and positive just 44% of the time. The last column shows a "typical day" for comparison. Finally, you can see that very little happens in the two days prior to the holiday; that is, the standard deviation of the returns indicate less volatility than usual. 

Chart 3 SPX Daily Returns Since 1966

Sign up now for a trial subscription of Schaeffer's Expiration Week Countdown! We'll send you 5 trades for expiration week, each targeting double- or triple-your-money gains in less than 5 days.



These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!


Common mistakes options traders make


Special Offers from Schaeffer's Trading Partners