Open account
☰
Open account
✖

S&P 500 forecast: Forward testing the S&P 500 around Thanksgiving

Article By: ,  Market Analyst
November 17, 2023 4:20 AM

Takeaways

  • A positive expectancy for the S&P 500 is apparent in the days leading into Thanksgiving
  • There is also a tendency for the S&P 500 to weaken on the Monday following Thanksgiving, before rising on the Tuesday
  • Whilst this data does not provide a solid roadmap for likely price direction, it does provide statistical comfort of a directional bias ahead and following Thanksgiving

 

Using daily data since 1987, I have looked at how the S&P 500 performs in the three days prior and beyond US Thanksgiving. As markets are closed on Thanksgiving, it means we’re looking at the three days up to the close on Thanksgiving eve, and the three following Thanksgiving when the markets are open.

 

S&P 500 average daily returns around Thanksgiving

T-1 is the day prior to Thanksgiving (or ‘Thanksgiving eve’, if there I such a thing), whereas T+3 is the third business day following Thanksgiving. Each bar represents one day, of the average return for each period.

 

S&P 500 analysis: Heading into Thanksgiving

Whilst there is a positive average return ahead of Thanksgiving (TG) on T-3 and T-1, we actually see a slight negative average return on T-2. As TG in on Thursday this year, it could suggest that Monday and Wednesday provide better odds of up days then Tuesday.

 

However, T-3 only has a 47.2% average positive return over the sample, whilst T-1 has the highest average return alongside a 66.7% win rate. Perhaps Wednesday may stand the best chance of an up day this year. And the fact that T-2 has a negative average return with a 64% win rate, it suggests the down days have been considerably larger than the up days over the sample. And that is why the median return is positive for T-2 and the highest for T-1.

 

S&P 500 analysis: After Thanksgiving

The day following TG (T+1) seems like a coin flip with a minor average positive turn and only a slight increase of up days relative to down. And as many traders take an extra day of vacation on the Friday to achieve a nice 4-day weekend, perhaps this makes sense. It is therefore interesting to note that T+2 (the following Monday) has a clear bearish bias with average return of -0.34% with a down-day rate of nearly 60%. It seems whatever optimism traders expressed heading into the long weekend is truly over when they return to their desks on the Monday.

 

A smoother way of looking at the data is to use a rate of change between the respective day and TG. And looking at the data this way better shows that my inking was on the right track; traders prefer to buy the S&P 500 heading into S&P 500. It also shows a desire to sell the S&P 500 thereafter. So how does this stack up against current price action?

 

 

S&P 500 daily chart:

The main issue I have with simply assuming a rally ahead of Thanksgiving next week is that we have already seen an extended run, and it is near resistance around 4540. The daily chart shows volatility has subsided over the past two days after its 10% rally into Wednesday’s high. But perhaps we’ll be treated to a pullback during the final session of this week later today. In which case, bulls could seek intraday bullish setup on Monday, Tuesday or Wednesday next week if price action respects intraday support levels.

 

Of course, as these stats are backwards looking and simply show average returns which smooth over the data set and ignore individual stories behind a move on a given day, this data should not be used as a roadmap. But it does at least provide some statistical comfort that the odds favour a rally into Thanksgiving and a slight selloff thereafter, assuming no large macro theme arrives to dominate sentiment.

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    • Open an account in the UK
    • Open an account in Australia
    • Open an account in Singapore

  2. Search for the market you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024