Tags: Friday | Monday | tax | market

Employment Report Could Create Stock Market Buying Opportunity

By    |   Friday, 03 Apr 2015 07:56 AM

On Good Friday, stock markets are closed in the U.S. But that won't stop the Bureau of Labor Statistics from releasing the monthly unemployment report. No matter what the report says, we are likely to see volatility in the stock market on Monday.

The first Friday of the month is often the most volatile day of trading each month. Unemployment is one of the most important economic indicators released each month and short-term traders often trade based on the data. This leads to large market moves — on average, volatility is six times greater than average on the day unemployment reports are released.

When markets are closed, traders are unable to immediately react to the news. In the past that has led to extreme volatility on the Monday after Good Friday unemployment reports. This has happened 10 times in the past 35 years and volatility has been 17 times larger than average that Monday. Volatility has usually been to the downside, with the S&P 500 showing an average loss of 0.5 percent that day.

If stocks behave as they have in the past, Monday will be a buying opportunity. April is the second strongest month of the year. The S&P 500 has closed with a gain 63 percent of the time in April since 1928, second only to December's win rate of 75 percent.

Both months benefit from tax season. In December investors are adding to retirement accounts to lower their income and taking losses to offset any capital gains. In April, they are also adding to retirement plans or investing money that had been set aside for taxes if the bill is less than expected.

Buying a dip early in the month could be the only way most investors will ever benefit from tax season and this year, the unemployment report could set up that trading opportunity.

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MichaelCarr
On Good Friday, stock markets are closed in the U.S. But that won't stop the Bureau of Labor Statistics from releasing the monthly unemployment report. No matter what the report says, we are likely to see volatility in the stock market on Monday.
Friday, Monday, tax, market
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2015-56-03
Friday, 03 Apr 2015 07:56 AM
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