Trading the three days ahead of the July 4th
Independence Day holiday have historically been stronger than the days after
the holiday. This has become more pronounced the last eleven years.
Since 2001 DJIA and S&P 500 have advanced 66.7% of the
time with average gains of 0.10% the day before. NASDAQ and Russell 2000 are softer
on the day before, but still lean bullish though Russell 2000 has an average
net loss of -0.05%.
On the trading day after Independence Day DJIA, S&P 500
and Russell 2000 have declined more frequently than advanced. DJIA has recorded
the fewest number of advances while Russell 2000 has the worst average
performance with an 0.11% loss.
Over the past eleven years since 2011, trading on the three
days before Independence Day has improved dramatically with DJIA and S&P
leading the way and posting sporadic losses.
Coming off the worst start to a year since 1962, the market bounced
back last week from its oversold condition with some help from quarterly rebalancing.
If the market can get through resistance around S&P 3900 this week this
bear market rally could continue into the first half of July.
Over the past twenty-one years, July has on average begun
with respectable gains. The second trading day has been weaker, but after this
the major indexes have tended to trend solidly higher through mid-month to
around the thirteenth trading day. At this point the major indexes have tended
to weaken and trade sideways to lower to finish out the month.
Then, just as everyone gets bullish again on the “Summer
Rally” hype, look for the perennial August/September/October weakness to strike
and reawaken the bear.