Some Days Really are Worse than Others

  • SumoMe

Some days are great. Some days are awful. Some days fall somewhere in between the two extremes.  Wouldn’t it be nice if we could eliminate some of the awful days? Unfortunately, in life too often the awful days end up taking us by surprise.

The same holds true to an extent in the stock market – great days, awful days and everything in between.  The one difference – as it turns out – is that we may be able to identify some of the bad days in advance.

Trading Days Best Missed

For our purposes we will count the first trading day of the month as TDM 1, the second as TDM 2 and so on.

We will also count backwards from the last trading day of the month as follows: The last trading day of the month is TDM -1, the next to last day is TDM -2 and so on.

Here are the Trading Days Best Missed:

*TDM 13 through TDM 16

*TDM -10 through TDM -5

Note that there is invariably some overlap between these two periods. For example, during September 2017 TDM -10 through -5 extended from 9/18 through 9/25 while TDM 13 through 16 extended from 9/20 through 9/25.

Still, there is no “guesswork”. One simply counts the trading days for a given month – backwards and forwards – and notes the “seasonally unfavorable” days as days to avoid the stock market.

The Test

For our test we will hold the Dow Jones Industrial Average on all days that DO NOT fall between TDM 13 through 16 nor through TDM -10 through -5.

During those days we will hold cash, earning 1% interest per year.

Obviously, this “system” involves trading in and out every month. Is it worth it to trade so often?  Let’s look at the results and you can decide for yourself.

The Results

Figure 1 displays the growth of $1,000 invested in the Dow Jones Industrials Average ONLY on the “bad days” spelled out above since 1945.1Figure 1 – Growth of $1,000 invested in DJIA ONLY during TDM 13 through 16 and TDM -10 through -5; 12/31/1945-10/30/2017

Figure 2 displays the growth of $1,000 invested in the Dow Jones Industrials Average all days NOT included in the bad days spelled out above (blue line) versus $1,000 invested in the Dow on a buy-and-hold basis (red line). 2Figure 2 – Growth of $1,000 invested in DJIA during all “not bad” days plus 1% annualized interest when out of the market (blue line) versus buying-and-holding (red line); 12/31/1945-10/30/2017

For the record:

*Buying and holding the Dow during ALL trading days since 1945 produced a gain of +12,003%

*Buying and holding the Dow ONLY during TDM 13 through 16 AND TDM -10 through -5 produced a loss of -82%

*Buying and holding the Dow ONLY during all other days produced a gain of +81,661% (or 6.8 times that of buy-and-hold)


Most investors are not enamored with the idea of trading in and out of the stock market each and every month.  Which I get.  Still, the relevant question is “If you knew in advance when a bad day was coming (psst, in terms of the stock market, the results presented here suggest that maybe we do), would you do something about it?”

It’s a fair question.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

4 thoughts on “Some Days Really are Worse than Others

  1. Has this method continued to do (consistently) well over the past two years?

    Thank you Jay for sharing your work.
    Always worthwhile and interesting.

    1. Jim, Consistent yes, but has underperformed buy and hold during the big bull market – as it tends to do. Look for a followup piece soon with yearly returns plus 5-year and 10-year comparisons between the “System” and Buy-and-Hold. Jay

    1. Only in an Excel spreadsheet. Example:
      Column A = date in yymmdd format (170610)
      Column B formula = =VALUE(LEFT(RIGHT(A7340,4),2))
      Column C formula = =IF(B7340<>B7339,1,C7339+1)
      Column D formula = =IF(B7341<>B7340,-1,D7341-1)

      B = month
      C = TDM
      D = -TDM

      As I recall these formulas had to be adjusted during the year 2000 through 2009
      Year 2000 B = =VALUE(LEFT(A2847,1))
      Years 2001 through 2009 B = =VALUE(LEFT(RIGHT(A3106,4),2))

      A bit cryptic but does the trick. Hope that helps.


Comments are closed.