Gapping Before The Holiday

The trading session before Good Friday tends to be positive (less so in March) but the futures are indicating a relatively large gap down open of more than 0.5%.

It's unusual to see a largish gap down before a holiday, because volatility tends to be lower as many traders have left early and there just tends to be an overall positive bias ahead of the break.

There have been 34 times since 1993 that SPY opened with a loss of at least 0.25% on the day before an exchange holiday, and somewhat surprisingly it tended to lead to more losses into the close. Only 15 of them managed to close higher than the open and only 6 of them closed higher than the previous day's close. This suggests a headwind for those betting that stocks will rise above Wednesday's close.

There were only two times it happened before Good Friday, in 2001 and 2012. Both of those happened to show gains, and neither one lost more than 0.3% from the open. We can't read much of anything into a sample size of two.

We'd consider this a minor negative for the day, and as noted in yesterday's Report the day after has had a negative tendency as well. Seasonality is a very minor consideration but it appears to be a headwind at the moment.