Trading Edge #55

Instrument/asset

S&P 500 (SPY) and Gold (GLD)

Trading rules

The third Monday of January is a non-trading day since 1998 – Martin Luther King Day (MLK). It has been a holiday since 1986. 

The  January MLK week has been weak. 

We make the following trading rules:

(The trading rules of the edge read like this (please also backtest yourself – you might find a way to improve it)):

• Go long at the close of Friday before the MLK holiday; and
• Sell at the close of the Friday one week later. 

Results SPY

It has been a steady negative “drag” since 1993 for SPY:

The average gain has been a negative 0.55% with a win rate of 36%. The week has been consistently negative from 1980 (not shown).

Opposite, for gold (GLD) it has been opposite from 1993:

The average gain has been a solid 0.8% with a win rate of 71%. However, prior to the 1990s it was poor, but so was the whole 1980s for the gold price.