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Memorial Day Returns
Market Indicator for the Week Ahead



Memorial Day Returns -- Significance for the Stock Market!

The SPX and a Bullish Outlook!



by Ian Harvey

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Memorial Day - 2012

Introduction

As we are all aware Monday is Memorial Day – a time to remember those who have given their lives while serving in the armed forces.

Memorial Day is a federal holiday observed annually in the United States on the last Monday of May. Formerly known as Decoration Day, it originated after the American Civil War to commemorate the fallen Union soldiers of the Civil War. (Southern ladies organizations and southern schoolchildren had decorated Confederate graves in Richmond and other cities during the Civil War, but each region had its own date. Most dates were in May.) By the 20th century Memorial Day had been extended to honor all Americans who have died in all wars. Memorial Day is a day of remembering the men and women who died while serving in the United States Armed Forces.

However, for the investors, traders and the stock market, will this Memorial Day returns produce a bullish or bearish theme?

The SPX and Memorial Day Week

The table below shows that the Standard & Poor's 500 Index (SPX) Memorial Day returns for the week have been pretty bullish. Since 2000, the average Memorial Day week return is 0.86%, while the typical week is relatively flat. Going back to 1980, the holiday-week averages a 0.97% gain, compared to a gain of 0.18% for any week. Also, since 1980, Memorial Day week has been positive 69% of the time, compared to 56% normally.

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The table below breaks down Memorial Day week even further. This data reveals that as the week drags on, things turn a bit more bullish compared to earlier in the week. Thursday has the biggest average return, and Friday is the most consistently positive day of the week. However, the last two years has seen the SPX fall by more than 2% during the four-day week.

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A Positive Sign

The table below contains some potentially good news for the rest of the year. So far this year, the SPX is up about 5%. The table below looks at the returns for the rest of the year after Memorial Day, breaking them down by whether the market boasted a year-to-date gain or loss before the holiday.


When the index was up, the rest of the year was positive an impressive 80% of the time, averaging a return of 7.21%. This significantly outperforms the years when the SPX was down at Memorial Day. Those years saw an average return of just 1.06% for the rest of the year.

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