Why? There’s an old adage on Wall Street that goes, “Sell on Rosh Hashanah and buy on Yom Kippur.”<\/p>\n
The saying highlights the seasonal weakness that typically occurs between those two Jewish holidays. It’s similar to the “sell in May and go away” maxim we hear every year.<\/p>\n
No, stocks don’t always decline during this time of year… But it happens often enough that there’s a saying about it.<\/p>\n
Friday marked the start of Rosh Hashanah, the Jewish New Year. It also kicked off a 10-day period known as the Days of Awe. This is a period of intense reflection for people of Jewish faith, which ends on Yom Kippur (the Day of Atonement).<\/p>\n
The adage originated many decades ago when it was common practice for Jewish investors to sell their stocks on Rosh Hashanah so they could concentrate on their prayers without the distraction of worrying about the stock market.<\/p>\n
They would then buy back their positions after Yom Kippur when they could concentrate on the stock market again.<\/p>\n
Nowadays, any weakness in the stock market during this time is likely more a matter of coincidence than it is the result of millions of Jewish investors dumping their portfolio holdings.<\/p>\n
But stocks still tend to decline during this period. In 2024, for example, the S&P 500 lost about 2%. Last year, the index fell 3% during the first half of the period. But, it gained everything back by the end.<\/p>\n
Going all the way back to 1915, the Dow Jones Industrial Average has declined an average of 0.62% between Rosh Hashanah and Yom Kippur. That’s a statistically significant weakness for a 10-day period.<\/p>\n
The declines have been much worse during periods of economic uncertainty when the market was already struggling. For example, in 2008, the S&P 500 dropped 18% during the Days of Awe.<\/p>\n
Of course, we headed into the Days of Awe with the stock market already struggling a bit. The S&P 500 closed Friday about 50 points below where it started September. Technical conditions were modestly oversold. And, investor sentiment (a contrary indicator) has pulled back a bit from its overly bullish reading just two weeks ago.<\/p>\n
A healthy decline over the next few days could create the sort of extremely oversold conditions, and the bearish investor sentiment, that often occur before we see a sustainable, intermediate-term rally.<\/p>\n
In other words, traders who’ve been waiting for a decent pullback in the market before putting money to work in anticipation of a year-end rally may soon get the chance to do so.<\/p>\n
Yom Kippur is just a few days away.<\/p>\n
Best regards and good trading,<\/p>\n
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Jeff Clark P.S.<\/strong>Today is the last day to join my 12 Trades to $1 Million Challenge. It’s the perfect way to dip your toes into options trading, since I’ll be giving you step-by-step, easy-to-follow instructions the whole time…<\/p>\n Take it from Hannah, who wrote in to tell me: “This was my first options trade ever and I made $1600 in profit! Which is a ton of money for me to make extra in a week. I’m so excited to see how the rest of this challenge goes and to learn so much. Thank you!” <\/p>\n
\nEditor, Market Minute<\/em><\/p>\n