I Love the Holiday Seasonality Trade for Stocks

Volumes are plunging

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Our View

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%.

Our Lean — Danny’s Trade

This is Danny Riley’s personal trading plan for the day.

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MiM and Daily Recap

ES recap

The ES sold off down to 4547.00 on Globex and opened Tuesday's regular session at 4549.50. After the open, the ES traded 4551.75 and fell into a sideways-to-lower back-and-fill pattern down to 4545.25 at 10:00, rallied up to 4550.00, and then dropped to a new low at 4537.75, rallied up to 4554.25 at 1:01, fell into another back-and-fill and then traded up to a new high at 4554.75 at 3:09. 

After the high, the ES dropped down to 45 as the 3:50 cash imbalance showed $269 million to buy and traded 4550.75 on the 4:00 cash close. After 4:00, the ES sold off down to 4536.75 after Nvidia reported earnings and settled at 4548 on the 5:00 futures close, down 13.25 points or -0.29% on the day. It was a very long day of low volume, downside chop.

In terms of the ES's overall tone, the pullback/weakness was long overdue. In terms of the ES's overall trade, volume was low: 193k traded on Globex and 837k on the day session for a total of 1.030 million contracts traded. Like the PitBull said last Friday, when volume drops, the holiday already started.

Technical Edge

  • NYSE Breadth: 32% Upside Volume 

  • Nasdaq Breadth: 33% Upside Volume 

  • Advance/Decline: 33% Advance 

    • a 90/90 NYSE breadth/Advance-Decline on Tuesday

  • VIX: ~13

S&P 500 — ES Futures

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Guest Post

PTG / Taylor 3 Day Cycle

Author: David D Dube’ (a.k.a. PTGDavid)

Prior Session was Cycle Day 3 (CD3):  As highlighted in prior DTS 11.21.23 Briefing..."Three-Day Cycle Target (4554) has been satisfied, so we will mark today as a “wild-card” as the next decline can begin at any time..."  Price in-fact declined approximately the average range for CD3 (34 handles), as buy response developed from within Target Master Breakout Level (4538). Prior range was 30 handles on 1.054M contracts exchanged. 

 …Transition from Cycle Day 3 to Cycle Day 1

This leads us into Cycle Day 1 (CD1): Most of the decline for CD1 is in-place, though the average decline measures 4532.75. Heading into the Thanksgiving Holiday break, expect volumes and volatility to remain subdued, as traders will most likely reduce their trade activity. As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 4550, initially targets 4560 – 4565 zone. 

Bear Scenario: Price sustains an offer below 4550, initially targets 4535 – 4530 zone.

PVA High Edge = 4553       PVA Low Edge = 4545         Prior POC = 4548

*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.

For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:

Link to access full Cycle Spreadsheet  > > Cycle Day 1 (CD1)

Thanks for reading,

PTGDavid

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!

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