Stock Market Holiday Hours — NYSE, Nasdaq and Bond Market
All times Eastern Standard Time
Dec. 24 Christmas Eve
NYSE and Nasdaq close at 1 p.m. Bond market closes at 2 p.m.
Dec. 25 Christmas Day
Dec. 31 New Year’s Eve
All three markets open but bond market closes early at 2 p.m.
Jan. 1 New Year’s Day
[Update: Hey! When I wrote this the market wasn’t quite in full retreat. Now that it is, whatever you do, be prepared and stay safe!]
Do you trade during the holiday season? Some traders don’t.
But they could be missing out …
Stock market holiday trading can potentially give you a nice little year-end boost. Ever hear of the Santa Claus rally? How about the December effect and the January effect? What about tax-loss selling?
There’s a lot going on in the markets this time of year. It’s a great time to take advantage of holiday psychology. Not to mention a few accounting tricks fund managers and financial advisers play with to please the tax man.
Let’s do a little Rudolph action and shine some light on this …
Table of Contents
- 1 What Is the Santa Claus Rally?
- 2 How Seasons & Holidays Affect Stocks
- 3 Stock Market on Holidays: Trading Strategy
- 4 3-Step Guide to Select Stocks Before Christmas
- 5 The Bottom Line
What Is the Santa Claus Rally?
The Santa Claus rally was first defined in 1972 by Yale Hirsch, the creator of the “Stock Trader’s Almanac.” Despite the name, it’s not a Wall Street gathering of a bunch of department store Santas. It’s the last five trading days of the year, plus the first two trading days of the new year.
These trading days are significant because since 1950 the S&P 500 has seen an average 1.3% gain during that 7 day period. Why do the markets get a bump at the end of every year? It’s a sign of the season.
There’s some psychology at play. There’s a tax-loss selling bump. There might even be some Christmas cheer and New Year’s resolutions at play. The key for you as a trader is to understand it so you can take advantage.
A word of warning: There’s a saying by the founder of “Stock Trader’s Almanac” that goes like this — “If Santa Claus should fail to call, bears may come to Broad and Wall.”
So the years when there’s no Santa Claus rally tend to precede bear markets. That’s likely what we’re seeing right now. We probably won’t have a Santa Claus rally this year.
This is important because of the madness in the markets: If there’s no rally this year, it might be best to hold off on any long-term strategy plays until prices settle — maybe later in 2019.
How Seasons & Holidays Affect Stocks
I’m a fan of trading patterns but I also pay attention to trends.
If you stay in this game long enough you’ll experience big changes in the market. There will be trends lasting several years — like the recent bull market. You’ll trade through recessions and periods of economic growth. You’ll see tight regulations give way to looser regulations.
All these things affect the market and help to create trends over longer periods. But there are also trends based on the calendar. Learning seasonal stock trading trends can help you increase your odds.
And it’s not only during the winter holidays. There’s an old Wall Street saying…
… “Sell in May and go away.”
Why? Because it was believed the summer months were bad for the markets and if you wanted to lock in profits from the first part of the year it was best to sell in May. Then, after a nice summer holiday in the Hamptons, you could waltz back into the markets for the autumn earnings season.
There’s also a belief among some traders that October is a declining month (the October effect) before a November rally. Then, in December you get tax-loss selling in the run-up to the Santa Claus rally.
Before I tell you about tax-loss selling and the January effect, it’s important you understand something about stock market holiday trading. Sometimes real numbers don’t support seasonal ideas about trading and the markets. Especially if the long-term trend is contrary to whatever is supposed to happen.
… and this is a big but …
… the psychology runs deep.
If traders get even a whiff of one of these seasonal buy or sell signals, they may look for any and every form of confirmation possible. It’s called confirmation bias. We all do it — most of the time at a subconscious level. For holiday trading, this can lead to one of those self-fulfilling prophecies.
You’ve heard me rant about the markets being inefficient, right? If not, head over to my YouTube channel after you read this. All this seasonal stuff is proof that the markets are inefficient. If they were efficient, it would be a lot harder to become a millionaire trading penny stocks. I love it!
OK, you’ll probably like this part: The Santa Claus rally is supported by numbers. BOOM!
Another cool one …
The January effect is also supported by numbers. At least for small-cap and penny stocks. Double BOOM!
Now you have psychology and numbers in your favor. Plus, you study your ass off so you know this and you can use it, right? If not, use this year to study and observe the stock market holiday magic. Better yet, join my Trading Challenge so you can get in on the discussions with my other students about how to use this information.
I mentioned tax-loss selling …
Here’s the deal: There are a lot of buy-and-hold investors that lose a lot over the course of the year holding shares that are down. Then they visit their accountant who informs them they can write off their losses on their tax returns but they need to sell their shares by year end. (Technically, it’s not a loss until you sell, right?)
Some of these so-called investors know this well in advance and they sell for a loss every year! WTF?
Here’s where the January effect comes into play …
… Sometime around the middle of January, these savvy tax-loss sellers decide to pile back into the markets. Remember I said the January effect is supported by numbers in small-cap stocks and penny stocks? Why do you think that is?
There’s a couple of theories about this. First, there are a lot more institutional investors in large and mid-cap stocks. A lot of these investors hold shares in a company long-term which helps stabilize the share price.
Then there are the small caps. These stocks stay in play during the year because professional traders drive liquidity. But what happens at the end of the year? The pro traders take the end of the year off. The funny thing is, the pro traders are generally more pessimistic than retail investors.
But when the cat goes away …
… the mouse likes to play.
Retail investors tend to be more bullish. They want so badly to build a nice nest egg for their retirement that they look at the December price drop and start buying. Usually small caps because they think there’s more upside.
They may also be the same investors who sold off in December. Even though they sold for tax purposes, they really believe in the company and its future prospects. So about mid-January, in they go.
Interesting isn’t it?
Do you see how understanding holiday stock market psychology can, quite possibly, increase your odds? Instead of being one of those traders who walks away at the end of the year pessimistic and grumpy, trade the underlying psychology.
Stock Market on Holidays: Trading Strategy
I’m not going to try to make any stock market projections. I’ll leave that to the talking heads over at CNBC. They get paid to spout their version of the truth. I’m more interested in you becoming a self-sufficient trader.
Here’s an idea of both short-term and long-term strategies for trading during the holiday season …
(Caveat: If you don’t feel ready or have any doubts about these strategies, paper trade them this year. See how they work. Then next year you can give them a go. Cool?)
#1 Short-Term Trading Strategy Before the Holiday
Want to know a great way to take advantage of the Santa Claus rally as a short-term trading strategy? Consider this …
Triple Witching Friday is the third Friday of every third month. That’s March, June, September, and December. The reason it’s called ‘triple witching’ is because stock index futures, options, and stock options all expire on these days.
There’s a belief that this increases volatility in the markets. I love volatility. It increases the chances of big price swings. But I digress …
Here’s a play that takes advantage of the January effect, the Santa Claus rally, and numbers you get on Triple Witching Friday. (This year it was December 21 — last Friday; the numbers are available as you read this.)
Find stocks making new lows on Triple Witching Friday and focus on them in case there’s a Santa Claus rally. This is definitely a short-term play. But that’s what we do, right? Play this as a dip-buy over a few days.
Is this guaranteed? No. Nothing is guaranteed. So do your homework. Research and make a plan. Remember to cut losses quickly if things start to go wrong.
By the way, this strategy tends to work best after market corrections. Have you been paying attention? This has been a pretty brutal few months for buy-and-hold investors. The markets are in full correction territory, so this might be the perfect year for this type of play!
#2 Long-Term Trading Strategy Before Holiday
Back to the January effect for a moment. I laid it out above in the way it’s supposed to happen. But guess what? The numbers say there could be a special mid-December opportunity if you know what to look for.
Remember those tax-loss sellers? They sell their losers near year-end for tax purposes, right? What happens when there are a lot more sellers than buyers? You guessed it, the price tends to drop.
So you have these stocks, already down, that suddenly get sold off by the average investor.
What happens? They get battered! But you can take advantage of it. Buy low and sell high, right?
Check this out…
According to the “Stock Trader’s Almanac” 2018 edition: “Stocks selling at their lows on December 15 will usually outperform the market by February 15 in the following year.”
Isn’t that interesting?
You know I’m not a buy-and-hold investor. I’m a penny stock day trader — so two months tends to be a long hold for me. But if I were a buy-and-holder, this is a pretty obvious play.
Find stocks hitting their low on or around the 15th of December, do your research to make sure it looks like a good play, and then buy for the January effect.
If nothing else, you could paper trade some of those plays this year and see if it’s something you could use in the future.
3-Step Guide to Select Stocks Before Christmas
Before you get too excited about stock market holiday trends, I want to reinforce one of my trading rules. This is a rule I learned through some hard losses and a little fear …
Don’t force trades. It doesn’t do you any good. You’ll likely lose your ass if you try to force it. That said, here are some ideas on how to apply the information in this post.
Stick to Your Strategy and Trading Plan
Whatever strategy you currently use — especially if it’s working — stick to it.
That doesn’t mean you can’t take advantage of the information in this post. But like I said, don’t try to force the trade and don’t chase trades. Remember, you can always paper trade an idea and come back to it next year.
That said, if you ’re ready to take advantage of stock market holiday moves, make sure you create a trading plan. Like any other day of the year, you want to know your entry and exit points. You should have a level of risk figured out. You want to know at what point it’s time to bail if things go wrong. My Trader Checklist can help you with that.
Use a Stock Screener To Find Good Opportunities
So you want to go for the Triple Witching Friday, Santa Claus rally, January effect bomb of a trade. But how do you find the right stocks to play?
Same as any other time — use a stock screener.
The best stock screener for penny stocks is StocksToTrade. I don’t just say that because I had a hand in developing it. I say that because I use it every day. It was made with you in mind. Read to the end of this post and I’ll give you a special holiday offer on StocksToTrade.
As for which stocks to screen for …
As always, look for patterns. I trade patterns because they’re recognizable and somewhat predictable. Do they happen as expected the same way every time? No way! I’m not promising you anything. But if you look for certain patterns — and screen for certain criteria — you can increase your odds.
Can you apply the patterns you’ve been learning to stock market holiday trends? Yes, but don’t force it. Remember, this isn’t an exact science. Look for the patterns and look for the holiday trends … if you find synergy, then take advantage of it.
A strong catalyst is one of my fundamental rules when planning a trade. News catalysts can drive big price swings. Find the right news combined with volatility and volume — it could be a stock you can play.
I mentioned looking for stocks hitting new lows on Triple Witching Friday. There are other stock indicators you can use. Personally, I tend to look for obvious support and resistance levels and then buy into breakouts or dip-buy morning panics. I also short-sell if the indicators are there.
My top student Tim Grittani uses moving average convergence divergence (MACD). There are others. The great news is that these are all built into StocksToTrade (STT). Not only that, but some of my favorite setups are programmed as screens on STT.
Knowledge is The Best Way To Increase Your Odds
There’s no escaping this basic concept. Want to know why successful traders are successful? Because they have more knowledge and more experience. That’s it. Most of them lost money before they made money.
Like my Trading Challenge students — they work their butts off on their education and then gain experience with small trades.
Sometimes the goal of the lesson is to lose a small amount. Why would I teach that? Because I want you to know how to get in and out of a trade and also how this really works. There’s a winner and loser in every trade.
Learn With a Mentor
There’s no better way — regardless of what you want to do in life — to become an expert at something than studying with a mentor. For centuries, we humans have been passing along hard-earned knowledge to the next generation. Mentoring puts the learning process in the fast lane.
Are you serious about a life of freedom? That’s what money buys, by the way. Money will absolutely NOT make you happy. Nor will a bunch of material things like a supercar or a house on the beach. Nope, sorry. Money buys you freedom. That’s it. It takes away the problems not having money creates …
… but it won’t buy you happiness.
Having said that, I wouldn’t trade that freedom for anything. And that’s why I want to teach you. I want you to be able to experience the freedom I know.
Here’s the deal: I’ve been trading for two decades and teaching for a decade. I have some students who have accomplished amazing things. I take pride in that. My Trading Challenge students work their tails off learning what I teach. And some of them even become better traders than me. I have no problem with that. I want that!
Are you serious about a life of freedom? If you are — and I believe you are if you’ve read this entire post — then apply for the Trading Challenge right now. Make this new year count in a big way.
The Bottom Line
Stock market holiday trades are just one of the strategies you should use to help build your account. As always, do your research, keep studying (every friggin’ day), and learn from your trades. Win or lose, there’s a lesson there.
I almost forgot! I have a nice holiday offer for you …
Remember I mentioned StocksToTrade? It’s my favorite trading platform out there for trading penny stocks. It’s an incredible tool for your trading. Plus, it has built-in screens for the patterns that made me my first million … and my second million.*
StocksToTrade Holiday Sale!
Sale runs from December 21, 2018 to January 4, 2019.
Option 1 for Nonsubscribers (new to StocksToTrade)
- As a special stock market holiday thank you, get 25% off your first two months of a monthly subscription
Option 2 for Existing Monthly Subscribers
- Upgrade to an annual subscription and get one year of TipRanks plus Chat Room for free.
- PLUS: you’ll get exclusive access to one week of StocksToTrade PRO in January
Are you kidding? This is a great deal! Like all businesses, trading stocks requires investment in tools. StocksToTrade is a no-brainer. It can save you money in the long run because everything you need is right there in one place.
Take advantage of this offer!
Have you benefited from stock market holiday trading? What happened? I want to hear your story. Leave me a comment.