Bastille Day Could Be Very Good for S&P 500
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It may be the closest thing to a sure shot on Wall Street.
Wednesday will be the day for investors to bet on a rise in the U.S. stock market, based on highly favorable odds instead of fundamentals like oil prices, corporate profits, interests rates, war and politics, according to a stock almanac followed by Wall Street pros.
While Wednesday is Bastille Day in France, in the United States it appears to be a day to go long the broad market. According to the 2004 Stock Trader's Almanac (search), July 14 scores the highest probability of the year -- better than 85 percent -- for a gain in the Standard & Poor's 500 index (search) based on more than 20 years of trading history.
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The almanac said it determined the probability after examining decades of daily market moves, although investors should never forget Wall Street's favorite disclaimer: past performance is no indication of future results.
The almanac is standard issue for well equipped, professional traders. Assembled by the Hirsch family since 1967, it is a compendium of trading history, facts and figures, along with daily quotations from business and political achievers.
"My best assumption with the date is we get a nasty sell-off in the early part of July, and it is a combination of that and the tendency of the witching, the expiration day on Friday," said Jeffrey Hirsch (search), editor in chief of the almanac.
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July 16 is the third Friday of the month, a day that typically brings increased volatility due to the expiration of certain options contracts.
"So it is a snap back (from a traditionally weak period for stocks) and one of the few shining spots of July," he said, noting that the day with the lowest likelihood of a rise in the S&P 500 is July 19.
The almanac said that Jan. 30 can claim the same odds for a rise in the S&P 500, based on trading data spanning from January 1982 to December 2002. It should be noted that the S&P 500 declined on Jan. 30, 2004, while it rose on July 14, 2003.
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Hirsch added that with the rise on July 14 of last year, the probability of an S&P 500 gain this Wednesday has risen to 86.36 percent.
"That really is remarkable," said one veteran trader at a leading New York-area brokerage. He said the trend may be tied to stock buying related to second-half investing for retirement plans, such as 401(k)s.
But, he said, "everything regresses back to the norm."
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When asked if he would bet the farm on the so-called Spiders an exchange-traded fund with underlying holdings that represent the S&P 500, another trader at a major New York brokerage said he would not.
"I have enough issues already," he said. He declined to elaborate.