History tells us to sell this Thursday (September 13, 2007) due to the Rosh Hashanah holiday. It then tells us to buy next Friday (September 21, 2007) when Yom Kippur begins.
Before you follow this advice blindly; I would like to explain that I am having some fun to open the week with some statistics from the Stock Trader’s Almanac. I don’t necessarily buy and sell based on these holiday patterns (and you shouldn’t either) but I like to note and highlight them on the blog from time to time.
The belief is that many traders and investors sell during busy religious observances and focus on their families and faith instead. With this in mind, the Almanac notes that positions are closed out, volume fades and a buying vacuum is created.
What makes these holidays special is the fact that they fall in September or October each year, two very volatile and opportune months. September is the biggest losing month for the DOW and S&P 500 since 1950 (the NASDAQ as well, since 1971). The three have a cumulative total loss of (57.7%), (37.6%) and (34.7%) respectively. The DOW has had 20 up-months and 36 down-months while the S&P 500 has had 23 up-months and 33 down-months during the period from 1950 to 2006. October has given the three indexes a total cumulative gain of 30.4%, 48.9% and 18.5% respectively. This helps to explain the success of the religious buys and sells.
September tends to open strong but then closes weak due to end-of-quarter mutual fund portfolio restructuring and many investors getting back into the swing of things after summer vacations, kids back in school and new business years (fiscal).
Religious Holiday Data:
The Dow Jones Industrial Index has been down 20 of the past 35 years from Rosh Hashanah to Yom Kippur and up 24 of the 35 years from Yom Kippur to Passover. The average loss starting on Rosh Hashanah is (0.4%) and the average gain is 7.1% after Yom Kippur. Seven of the past eight years have given us negative readings starting on Rosh Hashanah while 14 of the past 16 years have shown positive gains from Yom Kippur to Passover. The DOW has gained an average of 9.1% over the past 16 years from Yom Kippur to Passover with the 1998-99 period topping the list at 25.4%.
I leave you with this quote and the current chart of the Nasdaq:
“Major Bottoms are usually made when analysts cut their earnings estimates and companies report earnings which are below expectations.”
– Edward Babbitt, Jr.
I know this isn’t stock related but thought I would share a neat “nugget” among Jewish and Christian teachings which I have learned that deal with Spiritual matters around these holy days which are called the Days of AWE.
An snippet from (www.perrystone.org)
The Days of AWE “initiates the 10 days of AWE, in which the gates of heaven are opened to receive your prayers and the full attention of God is on your prayers. This is also believed to be the time when decisions are made for the next 12 months on God’s calendar and fates are sealed for the coming year.”
It is believed that during this “special season of prayer” you can change the decrees over your life and the favor of God (whether you will live or die, whether you will have a good year or bad year) through repentance of your sins.
I have personally witnessed within the last 3 years of my life my prayers answered within weeks to months of what I was seeking from God as a result of knowing this.
You can read more if you are interested at the following URLs:
http://www.voiceofevangelism.org/teshuvah.cfm
http://www.voiceofevangelism.org/archives/answered_prayer.cfm
Thanks,
Steven Mac