A potential trading window for stocks

Key points

• The fourth quarter has historically been a favorable time overall for stocks
• A particular trading window during late October/early November is approaching
• We examine the history below

Late October/Early November period

The period we will look at encompasses the last four trading days of October and November's first three trading days. For 2024, this period extends from the close on 2024-10-25 through the close on 2024-11-05. We will start our test in 1950 using daily closing price data for the S&P 500 Index.

The chart below displays the hypothetical growth of $1 invested only during this period every year starting in 1950.

The table below displays year-by-year results.

The below summarizes the yearly results during this seven-day trading period.

For comparison, the table below summarizes S&P 500 performance for ALL seven-day trading periods.

What the research tells us…

A Win Rate of 72% and a Median Win/Loss ratio of 1.75 (compared to 57% and 1.04 for ALL seven trading day periods) suggests favorable odds and a potential edge. However, the reality remains that there is no guarantee from year to year that this period will show a gain. Short-term traders might play this by holding a long position in Emini S&P 500 futures or an ETF such as ticker SPY (futures trading involves significant leverage, which should be fully understood and appreciated before taking any position in any futures contract). The key questions to ponder are: 1) Is this slight edge worth committing capital to, 2) What percentage of trading capital to commit, and 3) If and where to place a stop-loss order? Each trader must answer these questions based on their own circumstances. For longer-term investors, the message would seem to be to simply stay the course, at least for the next week or so.