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Seasonal Strategy: Sell Rosh Hashanah, Buy Yom Kippur

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Seasonal Strategy: Sell Rosh Hashanah, Buy Yom Kippur
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There are several old trading adages related to the markets. The more common ones such as "Sell in May and go Away," "Santa Claus Rally" and the "January Effect" all refer to seasonal strategies to time the market.

One that is not as well known, however, is the "Sell Rosh Hashanah, Buy Yom Kippur" trading rule.

The rule's origin is based on the concept that followers of the Jewish faith want to be free from material possessions during the most sacred period of the calendar year. During the 10 days between the two major holidays, Jews are to reflect on their actions from the previous year and atone for their sins, while setting a new agenda for the upcoming year.

Upon completion of the cleansing process, Jews are free to return to the markets and to evaluate investments for the upcoming year; some may even abstain from the markets altogether during this time period.

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Mixed Results

The strategy has yielded mixed results over the last few years. If one had implemented this strategy in 2008, however, they would be convincingly in the black over the last 13 years. The 17.76 percent beat down in 2008 may not be replicated for quite some time.

Before blindly implementing this strategy, investors should consider other factors. The significance of the 38th week of the year represents the worst week of the year for the S&P 500 Index going back to 1950. Along these lines, September is the usually the worst month of the year for the market.

Other Factors

Another important factor that investors should consider is that indexes are coming off an all-time high from last Friday, September 19, that was dictated by lopsided buy imbalances off the quadruple-witch expiration open. After making its all-time high, the indexes drifted lower after the open and settled near the lows for the session.

The weakness spilled over into Monday and Tuesday's session. The Street is again waiting for the "buy the dip" crowd to exert its influence and take the indexes back to new all-time highs.

Geopolitical Risks

Geopolitical risks are also at a heightened level, as the United States and its Arab allies have combined to launch airstrikes on ISIL's military stronghold in Syria. Israel actually destroyed more than 30 tunnels near its Gaza border during Operation Protective Edge last month.

The ultimate goal of the tunnels was to execute as many Jews as possible that congregated in kibbutzes to observe the Jewish holidays. An Islamic Jihad operative told a Qatar-owned network that it began rebuilding the tunnels "the day the war ended in Gaza."

As with any stock market adage, it should be taken with grain of salt. Traders and investors can attest to the fact that there is not one foolproof strategy that can be solely relied on to time the market. Investors should always review their goals and objectives of their investments.

Posted-In: Jewish New Year Rosh HashanahTechnicals Politics Psychology Top Stories Trading Ideas General Best of Benzinga

 

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