US Stocks: A Potential Seasonal Headwind for MLK Week Amidst Key Earnings Reports

The average and median returns for all the major US indices are negative for this week...

Crypto 1

As anyone trading US stocks, indices, or bonds has probably realized by now, the markets are closed today for the Martin Luther King (MLK) Day holiday.

While certain states and cities began to honor the civil rights activist starting in 1971, MLK Day was not an official federal holiday until 1986, and it wasn’t recognized with a market closure by the NYSE until 1998. That said, we still have more than 20 years of data on US stock markets’ performance in the shortened holiday week, and the picture is not pretty:

Source: Stock Traders Almanac

As the chart above shows, the average and median returns for all the major US indices are negative for this week, with no index rising more than half the time. That said, the figures have been more bullish since we’ve been in the more recent bull market, with most of the major indices (including the DJIA, Nasdaq, and Russell 2000) rising in six of the past eight years.

Of course, the full 22 period sample is a bit light to draw any firm conclusions, but we wanted to make readers aware of a potential seasonal headwind, especially with many US indices deep in “overbought” territory following the big rally over the past few weeks. Traders should keep a close eye on major companies reporting earnings this week, including Netflix (Tuesday), Procter and Gamble (Thursday), Intel (Thursday), and American Express (Friday).

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.