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Stock Market Rebels on the Fourth of July

Posted July 3, 2008

“Last week certainly rebelled against the pre-holiday pattern. We were supposed to get a nice lift starting last Tuesday — a mini rally to usher in the Fourth of July holiday. This is tradition. The eight-day pre-holiday bull pattern goes back decades, at least to 1901.” — Lynn Carpenter

by Lynn Carpenter, Investor’s Daily Edge

Baltimore – (TFN): We’re all Yankee Doodle Dandies tomorrow. The U.S. stock markets will be closed and we’ll be celebrating the Fourth of July.

This is a foreshortened week at Investor’s Daily Edge, the August Rising Tide copy is on the boards, and I’m doing everything a day early. So I don’t know how the whole week is going yet, but one thing’s for sure… last week certainly rebelled against the pre-holiday pattern.

We were supposed to get a nice lift starting last Tuesday — a mini rally to usher in the Fourth of July holiday. This is tradition. The eight-day pre-holiday bull pattern goes back decades, at least to 1901.

Market-savvy investors have believed in it for years and some studies suggested they were right. Then a 1990 study confirmed that a “holiday effect” does exist, just as street wisdom and some earlier studies thought. But Robert Ariel, the author of the 1990 study, got a bit more specific. The eight days leading up to each of our various holidays account for about a third of the market’s total annual return. Though Christmas brings the biggest gifts, all holidays that result in a market closing—the Fourth of July, Memorial Day, Thanksgiving, etc.—normally get a boost. Read on to learn why this holiday’s rally didn’t happen.

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Posted by Lynn Carpenter · Filed Under US Stocks and Markets 

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