Investor Alert

Market Extra Archives | Email alerts

Oct. 5, 2022, 4:31 p.m. EDT

‘Sell Rosh Hashana’ strategy undone by stock-market bounce. Why ‘buy Yom Kippur’ might be a good set up.

Watchlist Relevance

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    S&P 500 Index (SPX)
  • X
    Dow Jones Industrial Average (DJIA)
  • X
    NASDAQ Composite Index (COMP)

or Cancel Already have a watchlist? Log In

By Isabel Wang

It might seem arbitrary to take investing advice from old market adages, but there is one market strategy commonly mentioned ahead of the Jewish holidays – “Sell Rosh Hashana, Buy Yom Kippur.” 

This year, Rosh Hashana, which is the beginning of the year according to the traditional Jewish calendar, began at sunset on Sunday, Sept. 25. Meanwhile, Yom Kippur, or the Day of Atonement, began at sundown Tuesday and ends at sundown Wednesday.

“The thesis is that folks sell positions on Rosh Hashana, the first of the Days of Awe, to rid themselves of financial commitments and then return to the market after Yom Kippur, the Day of Atonement,” wrote Jeff Hirsch, editor of the Stock Trader’s Almanac, in a note dated Sept. 23 . “It is no coincidence that this coincides with the seasonal September/October weakness.”

According to the Stock Trader’s Almanac, the Dow Jones Industrial Average has fallen 29 out of 52 Rosh Hashana holiday periods with an average decline of 0.5%. 

This year, “sell Rosh Hashana” worked like a charm until Monday and Tuesday, when the U.S. stocks posted the strongest start to a quarter since 1938 with back-to-back gains. The S&P 500 /zigman2/quotes/210599714/realtime SPX -1.47% gained 3.7% from the close on Sept. 26 to the close on Oct. 4, while the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.14% advanced 3.6% and the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.57% rose 3.5%, according to Dow Jones Market Data.

Last week, three indexes posted their worst skid  in the first nine months of any year in two decades.

Hirsch had warned last month that it might be a bit late this year for traders to follow the traditional market strategy to sell at Rosh Hashana, but saw a favorable prospect around buying at Yom Kippur.

In a follow-up phone interview with MarketWatch on Sept. 23, Hirsch explained that it is the seasonal movements and the quarterly movements of the large institutions, which tend to make September the worst month for stocks and the week after the “triple witching” expiration of futures and options “notoriously bad”, while October is “this bear killer as we say in the almanac.”

See: ‘Bear killers’ and crashes: What investors need to know about October’s complicated stock-market history

Triple witching ” is a quarterly phenomenon referring to the simultaneous expiration of three different types of derivative contracts – stock-index futures, stock index options and stock options. It happens on the third Friday of the third month of each quarter. 

“A host of fears from inflation, a hawkish Fed, bellicose Russia, global upheaval, U.S. midterm politics is exacerbating the usual seasonal and 4-year cycle carnage,” Hirsch wrote. 

Lindsey Bell, chief markets and money strategist at Ally, believes there will be a “Santa Claus rally” after the markets get through the month of October, the coming earnings season and the midterm elections.

“I am a believer that towards the end of the fourth quarter, we will be able to potentially see a ‘Santa Claus rally’ because you’re going to start to see more signals that the economy is headed in the right direction, and inflation is falling,” Bell told MarketWatch on Tuesday.

See : Why investors shouldn’t expect a break from the stock-market whiplash, says this strategist

Stocks finished the Wednesday session in the red with the Dow shedding 0.1%. The S&P 500 lost 0.2% and the Nasdaq dropped 0.3%.

-63.91 -1.47%
Volume: 0.00
Sept. 26, 2023 5:09p
US : Dow Jones Global
-388.00 -1.14%
Volume: 0.00
Sept. 26, 2023 5:09p
US : Nasdaq
-207.71 -1.57%
Volume: 4.72B
Sept. 26, 2023 5:16p

This Story has 0 Comments
Be the first to comment
More News In

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.