The markets will be closed on Monday, January 16, in honor of Martin Luther King Jr. Day. Keep track of all Market Holidays with TipRanks’ Market Holidays calendar.
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The Holiday Seasons and Stock Trading Volume
Because both professional and ordinary traders take vacations during the holidays, the stock trading volume typically decreases. However, that does not imply that there is no trade going on. Stock prices may also be more erratic than usual since there are fewer buyers and sellers to assure liquidity because fewer traders are active in the markets.
This elevated stock volatility may offer opportunities to profit from market swings for traders looking to make quick gains over the holidays.
Furthermore, just because the stock market is less active doesn’t mean everything is tranquil. Keeping up with political and economic news throughout the holidays may help you profit from upcoming market developments as these topics continue to impact stock prices.
The Martin Luther King Jr. Day Holiday Effect on Trading
Martin Luther King Jr. Day is the first holiday of the year. The third Monday in January is always designated as a holiday, and the stock market is closed that day. The holiday can be observed as early as January 15 and as late as January 21.
Although Martin Luther King Jr. Day was declared a federal holiday in 1986, it wasn’t until 1998 that the exchanges began shutting on that day. On average, the market has been more upbeat on the Friday before Martin Luther King Jr. day and less so on the Tuesday after. According to Dow Jones Market Data, the S&P 500 (SPX) and the Dow (DJIA) have since had an average 0.2% gain on the trading day before the holiday and a 0.2% loss on the following trading day.
The statistics for MLK week since 1998 are broken out per day of the week in the table below. As you can see, the SPX has a negative average return for three of the four trading sessions in the post-holiday week: Tuesday, Thursday, and Friday.
Source: Yahoo Finance
Keep careful watch this week for a holiday effect, post-Martin Luther King Jr. Day.
