I Love the Holiday Seasonality Trade for Stocks

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I don't have anything to say other than look at the volume. Yesterday's volume was the lowest since May 8th, which was 1,000,924. Let's face it folks... no one is trading. Everyone is taking advantage of the short trading week.

This is the time of year to pay close attention to the historical stats/seasonality trends. I will never know the stats like my buddy Jeff Hirsch at Stock Trader’s Almanac, but the reason I like this time of the year is two-fold: The best 6 months for stocks and the seasonality surrounding the holidays. 

Thanksgiving to Santa Claus Rally Trade-Time To Feast 

Thanksgiving kicks off a run of solid bullish seasonal patterns. November-January is the year’s best consecutive 3-month span (2024 STA p 149). Then there’s the January Effect (2024 STA p 112 & 114) of small caps outperforming large caps in January, which begins in mid-December.

And of course, the “Santa Claus Rally,” (2024 STA p 118) invented and named by Yale Hirsch in 1972 in the Almanac. Often confused with any Q4 rally, it is defined as the short, sweet rally that covers the last 5 trading days of the year and the first two trading days of the New Year. Yale also coined the phrase: “If Santa Claus should fail to call, bears may come to Broad and Wall.”

We have combined these seasonal occurrences into a single trade: Buy the Tuesday before Thanksgiving and hold until the 2nd trading day of the New Year. Our good friend and renowned technician and options guru Larry McMillan of the Options Strategist opened our eyes to this trade and runs it with options starting on the day before Thanksgiving.

Since 1950, S&P 500 is up 79.45% of the time from the Tuesday before Thanksgiving to the 2nd trading day of the year with an average gain of 2.57%. The Russell 2000 is up 77.27% of the time since 1979, with an average gain of 3.19%.