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Labor day in the US. Only once a year, so not a good sample size (11x).
When I treat all the US holidays that always fall on a Monday the same (Martin Luther King day, Presidents’ day, Memorial day, Labor day), then the sample size is 41 (when I exclude the days that are German IFO or German holidays). Still small, but better.
As the statistics don’t look good, no trade today.
I've been reading Martin Zweig's Winning on Wall Street, where, in his chapter on Seasonal Indicators he mentions holiday trading. At the time of writing (first edition came out 1986) he had observed a strong tendency for equity markets to rally on the day before a holiday.
From page 157: "covering a twenty-three year period which I have tabulated, there were a total of 223 pre-holiday trading days. Of these, the market rose in 193 cases, or 83% of the time. Only 28 times, or in 12% of the cases, did the market fall; the market was even 12 times, which is 5% of the cases."
He also writes that "the holidays with the most bullish tendencies are Labor Day and New Years. Labor Day produced the best percentage gains..."
I took a look at some more recent data around Monday holidays last week and found that over the last 11 years or so the tendency to rally on a pre-holiday Friday (my sample size was 57 observations in the ES) was a bit lower than it was in Zweig's sample, rising just 65% of the time, but that's still a decent 2:1 ratio.
Also, in Zweig's book he describes a strategy where, if the market is flat or goes down on the day before a holiday, we would reverse and go short for the post-holiday session. This strategy, according to his observations from 1952 to 1985, would have produced 223 winners and just 8 losers.
Again, Zweig's observations may be rather dated at this point, but I still found it very interesting reading. I highly recommend the book.
I read this book when it came out, which dates me. I agree it's a good book, and some things don't change. I have observed since approximately the beginning of time (a slight exaggeration) that on the day before traders get time off markets tend to go up, and the day they have to come back to work, markets don't. I don't think this is a coincidence.
(Also, not all "trading" is by professional or dedicated traders. A lot of stock buying/selling is by regular people who are putting money into their investments for their own reasons, and the ebb and flow of the general public mood before and after a long weekend may be a factor.)
I have a book on my shelf, which I'm not going to dig out right now, published before Zweig's, that, if I recall correctly, found this to hold up back into the early 1950's or possibly earlier. For a long time, anyway.
It also tends to work for normal Fridays (traders happy) and Mondays (not so happy), although not with the same reliability.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
You're absolutely right, Bob. There might also be some mild tendencies for stocks to rise just after employees receive their 401(k) contributions each month, and fresh cash gets put to work in the index and mutual funds on the first business day of the new month. Such mechanical, non-economic supply and demand events can and do impact markets in ways seldom captured by simple price-action or chart analysis.
Many of these tendencies and calendar events are insufficient to produce a profitable stand-alone trading strategy, but when combined with other factors, filters, or conditions, can produce reliable statistical edges, as @Deetee and @GFIs1 have ably demonstrated in their journals. This type of work has certainly helped me improve my own results and inspires me to continue my research, hence my interest in these journals.
If you are daytrading, then this statement might be more useful :"3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history."This data has been confirmed by Richard Boisvert of Taylor Trading Technique during a webinar of Polaris Trading Group. Apr. 8th, 2016, Module 16 (min 38).
Now, more then 5 years later this is still valid.
