Stock Market Today: August 6th - 10th, 2018

^^ pretty incredible! very cool to be witnessing market history ... and even cooler to have witnessed this bull run from the very beginning

 

Dissecting the Trading Day

Back in January, we published a Chart of the Day that raised quite a few eyebrows. Investors just couldn’t get over one of our findings. What was it? It was that since 1993 when the S&P 500 tracking SPY ETF began trading, ALL of its share price gain has come from moves outside of regular trading hours. That’s right. Had you bought SPY at the open of every trading day since 1993 and sold it at the close that same trading day, your cumulative return over the entire period would be negative (-9.8% through the end of this July). On the other hand, had you bought SPY at the close of every trading day and sold it at the open the next morning, your cumulative return would be +608%. Keep in mind that this doesn’t take dividends into account — it’s only looking at price change — but adding in dividends would actually boost the performance of the “after hours” strategy.

Below is a chart highlighting the strategy’s performance over the years. You can see that the returns diverged significantly in the late 1990s towards the end of the Dot Com bubble. From 1997 through the peak in 2000, investors were consistently bidding up the S&P after hours only to see gains wiped out during the trading day. Then during the bear market that followed the Dot Com peak, the “regular trading hours” strategy plummeted to -50%, and since then it still hasn’t been able to work its way back into positive territory.



Looking at the strategy over a shorter time frame tells you a lot about the current market environment. Below is a chart showing the performance of the “after hours” versus “regular hours” strategy over the last year.

As shown, had you bought SPY at the close every trading day and sold it at the open the next trading day, you’d be up 14.4% over the last year. Had you bought at the open every trading day and sold at the close, you’d be down 0.2%. This means that over the last year as well, all of SPY’s gains have come outside of regular trading hours.

From last July through the January highs, both strategies were positive, but during the correction from January through April, we saw investors unload SPY during regular trading hours, while the after-hours strategy remained relatively stable. Since the April lows for SPY, we’ve seen a different pattern emerge. We’ve actually seen SPY trade flat outside of regular trading hours, but it has been bid up during regular trading hours. This is much more bullish than if the reverse were true. We’d prefer to see a market where investors are actively buying throughout the trading day versus a market that is opening higher and then getting sold off during the day.

 

good tuesday morning stockaholics!

here is the pre-market thread for those wanting to get a quick read before today's open-
<-- click there to open!

hope everyone has a great trading day ahead!

 

looks like markets pretty much on cruise control here...not really too much happening out there.

VIX flirting with the single digits...almost has that 2017 feel to it again lol.

seems like absent some black swan-ish event it looks like we'll get our new ATH print on the SPX that @stock1234 has been calling for this summer.

looking forward to getting out of these summer doldrums.

baby step to september already

 

what are we, like about 10 handles away?

yeah good point there about the midterms...wouldn't mind to see an early feb. style correction this fall setting us up for yet another glorious BTFD going into the traditional EOY santa rally

 

Midterm Election Countdown: Historically October Best Time to Buy

One of the more interesting graphics that keeps coming across my screen(s) is a table of S&P 500 returns in the months leading up to Midterm election day. We have gone ahead and recreated the table using data sourced from the annual Stock Trader’s Almanac starting with the midterm election in 1950. This results in 17 years of data to analyze.



This table does not contain a worrisome amount of red and the percentage of time the periods are positive is also quite respectable. Keen observers will notice that the average historical return for the 6 months before midterm Election Day is just 1.31% compared to an average historical return of 4.66% for the 1-month immediately preceding midterm Election Day. In fact, the historical average performance in all periods before the 1-month period is less than 4.66%. So what is really happening in the 6-months prior to midterm Election Day?



S&P 500 is actually declining in May/June and then trading sideways until late September/early October. On average the vast majority of S&P 500 gains are from late September to midterm Election Day. Thus far in 2018 there has not been any meaningful decline, but it is still early in August with nearly three months to go before midterm elections.