Seasonal Strategy: Sell Rosh Hashanah And Buy Yom Kippur

There are several old adages that are related to the markets. The more common ones such as "Sell in May and go way, "Santa Claus Rally" and the "January Effect" all refer to seasonal strategies to time the market. Based On The Jewish Holidays However, one that is not as well known or followed is "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 ten days between the two major holidays, Jews 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 its investments for the upcoming year.. Also, some ultra-religious Jews may abstain from the markets altogether during this time period. Mixed Results Over the last few years the strategy has yielded mixed results, but if one had implemented this strategy in 2008, they would be convincingly in the black over the last fourteen years, Of course, the 17.76 percent beat down that year may not be replicated for quite some time. Before blindly implementing this strategy, investors should consider other factors as well such as the month of September is the usually the worst month for the market. In 2014, this strategy yielded profits. The first evening of Rosh Hashanah was on September 24 and the observance of Yom Kippur ended on October 6. Over that time period, the S&P 500 index declined 1.5 percent, it would have down another 1.1 percent if not for a jobs day rally on the preceding Friday. Different Scenario However, at the time of the Jewish holidays last year the market was just off it all time highs. Fresh off a quadruple witch expiration that was lopsided with buy imbalances on September 19, had the market ripe for a pullback. In 2015, the quadruple witch expiration will take place during the during the stretch between the two holidays on September 18.. That turns out to be four days before the first session after Yom Kippur observance concludes on September 24. Therefore, whether or not saying may hold true may hinge on the trading activity from the usually volatile session. Also, the market is quite some distance from its all time and is struggling to regain its composure after the August 24 Flash Crash. At this time, it has gyrating in a large trading range unable to clear major resistance nor test of the validity of the low made on that historic day. Other Factors Last year there was geopolitical risks were at a heightened level as the United States and its Arab allies combined to launch airstrikes on ISIL's military stronghold in Syria. Also, Israel destroyed more than 30 tunnels near its Gaza border that were created to attack kibbutz's as the Jewish people observed their most sacred holidays. Certainly, a reason for caution in the marketplace. In 2015, the fragile state of the Chinese economy and markets has the investment world concerned about a worldwide recession or depression if they fail to recover. More importantly, the Fed has the entire investment world on edge as they deliberate whether or not to raise interest rates later this month. Which may not be the best idea US economy appears to be stalling and there is no sign of inflation on the horizon. Also, a hike in rates would further strengthen the dollar and makes US good less affordable to our trading partners. Conclusion As with any stock market adage, it should be taken with grain of salt. Any investor can attest to the fact, that there is not one foolproof strategy, no matter what it is based on, that can be solely relied on to time the market. Instead investors should constantly review their goals and objectives of their investments and based their decisions on that long-term plan.