SP500 Holiday Trading Price Fluctuations

Did you know . . . This was the season for "Selling Against the Box", but tax laws changed in 1997 which made deferring tax gains more difficult. So market behaviour since 1997 around the holiday season has changed substantially and comparing the past with the present becomes invalid because the rules of the game changed.

Will this year's holiday week be different from the past 5 years? The odds say it will (no strategy has 100% accuracy), or is this the only predictable trade for the entire year every year?

11/28/03 - it's official. Buying the dips still works. That's 100% accuracy for 6 years running.

Seasonal Trading?The graph below shows us a trading range that has occurred in 4 out of the last 5 years. If 2% is converted into SP500 points then for 2003; 2% = 21 points and 4%= 42 points. So the odds are prices will be up 20 to 40 points and then make a return trip. Note that last year (2002) this didn't work out. However, note that if the SPX rises 20 to 40 points then the Dow Jones Industrial Average will reach 10,000 and the NASDAQ composite will reach 2000. These are major resistance levels at the moment. So if the market jumps these pyschological barriers, watch out for an explosion upwards!

Where's the Santa Claus rally?       In recent years, prices don't just rise. Relative to option expiration, only 1999 saw prices rise in the past 7 years. Below is a chart of how prices changed from the Monday after November's option expiration to December's Option Expiration. Notice that all data is referenced to December's option expiration price. So in 2002, prices rose 3% and then fell 6%. In 2001, prices remained unchanged after 22 days of trading. In 2000, prices had an upward bias but finished 2% lower.