Should you buy or sell US stocks during the Thanksgiving week?
- Thanksgiving week has the tendency to be bullish for stocks
- SPX struggled at the 4,000 level, which may turn out to be a pivotal one
- If confirmed, a double bottom pattern suggests more upside is possible in the last trading weeks of the year
As the world pays attention to the Fifa World Cup tournament that just started in Qatar, investors are preparing for one of the most interesting weeks for the US equity market –Thanksgiving week.
Ahead of Black Friday and Cyber Monday, some important economic releases out of the United States might move the market, such as the FOMC Meeting Minutes. Scheduled on Wednesday, they will reveal what the FOMC members discussed three weeks ago and how stocks may react.
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But the focus is likely to be on this short three-and-a-half days week. The US stock market are closed on Thanksgiving (i.e., next Thursday) and will open for only half a day on Black Friday.
The name tells us everything. Traditionally, retailers sell so much during the upcoming Friday that the sales put them in “black” for the year.
Hence, it is no wonder that stocks tend to rise during the Thanksgiving week.
Thanksgiving week has tended to be bullish
Historically, stocks have risen during Thanksgiving. In the past fifty years, stocks gained, on average 0.54% during the week, with Wednesday being the day in the trading week when stocks gained 78% of the time with an average gain of 0.3%.
4,000 is a pivotal level for the S&P 500 index
Since May, the S&P 500 index has struggled with the 4,000 level. On the bullish side, every attempt to move lower was met with buying.
Moreover, one can talk about a possible double bottom pattern for the index. If confirmed, the measured move points to an attempt to a new all-time high.
On the bearish side, the inability to break the series of lower highs calls for caution. Bulls may want to wait for a daily close above 4,000 and then for the index to rally above 4,300 before going long.
All in all, expect stocks to be supported on every dip this week. In particular, if there is a stock market rally, look for it to come on Wednesday.