Memorial Day Week Is Usually Bullish
Market Outlook
The CBOE Volatility index exploded a few weeks ago during the brief stock market crash, but the VIX sank back to extremely low levels as the major equity indexes achieved new all-time highs. Jeff Hirsh in the Stock Traders’ Almanac wrote about how the days after Memorial Day have been rather bullish. In what used to be the “May/June Disaster area” the S&P was down 15 of 20 Mays from 1965 to 1984. Then May was the best month from 1985 to 1997. Some of this bullishness after Memorial Day can be attributed to the strength of the first two days of June (like this year). In recent years, the Friday before Memorial has become getaway day on The Street and volume is often diminished and trading uninspired. Nasdaq exhibits a similar pattern to S&P 500 over the same time periods. The updated graph below indicates investors converting back to risk-on trading by overindulging in high-flying tech stocks. Other equity indices are also coming on strong outperforming risk-off assets like gold and bonds. This is another strong indicator of higher near term stock prices. Absent an actual pullback, stock prices are pausing before the next move which presents an opportunity to catch the next bullish leg.
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