A Pre-Holiday Drift?

Based on historical trading for the session before Memorial Day, stocks might be in for a taste of the summer doldrums on Friday

By Paul Cherney

The Memorial Day weekend is the unofficial start of summer for Wall Street. Here are some historical performance statistics about the Friday before the Memorial Day weekend. These stats are based on S&P 500 price data from 1972 to 2002 (31 years).

We might be in for a taste of the summer doldrums on Friday. The average change in price as of the close for the S&P 500 for all the Fridays in the data sample was a small gain of 0.19%.

About 71% of the time, the change for the day (up or down) has been less than 1%.

The study showed that 64.5% of the time, the S&P 500 lost ground as of the close on the Friday before Memorial day weekend.

Something that might not be readily obvious: if the average performance was a gain of 0.19%, but the index actually lost ground 64.5% of the time, then this means that there are occasions that can can see outsized gains. Of the 9 times that prices moved more than 1% from the close of the previous session, 7 of them were gainers:

• 1981, +1.10%

• 1986, +1.41%

• 1987, +2.46%

• 1988, +3.45%

• 1990, +1.71%

• 1991 +1.18%

• 2000, +3.22%

High end-of-day Put/Call ratios again on Thursday should keep a floor under prices on Friday.

The VIX (market volatility index) is probably going to have stay below its 10-day exponential moving average to confirm any rise in prices on Friday. Near Thursday's close, the VIX's 10-day exponential moving average was 22.55.

Historical odds still favor that the S&P 500 should post a close of 911 or lower. Longer-term indicators based on weekly bars are in configurations which usually do not see appreciable upside, so in the longer-term (more than the next trading day), sideways markets might unfold and the bottom edge of the sideways price band might not have been discovered yet.

The S&P 500 has a layer of support at 925-912. The end-of-day charts clearly show substantial support at 910-862.

The S&P 500 has resistance at 935-948, with a focus of 938-945.

The Nasdaq has a band of resistance at 1489-1519.00; inside this band, smaller pockets of resistance are 1499-1507.96 and 1507-1519.00, which makes the 1507-1508 area a focus of resistance. Next well-organized resistance is 1534-1551 but technically, the resistance above 1519 starts at 1526 and higher.

Nasdaq support is 1478-1451, with thick support at 1471-1461.

Cherney is chief market analyst for Standard & Poor's

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