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Before 1987, the Wednesday before Thanksgiving and the Friday after exhibited a reliable track record of small percentage gains from the S&P 500 (NYSEARCA:SPY). In fact, in the 26 years between 1960 and 1986, the only year the S&P experienced a loss was 1964. The reasons behind this trend could range from institutional investors taking an extended break, as evidenced by the lower-than-average volume over this week or perhaps the market just tends to feel good going into one of the biggest shopping days of the year. Who knows, but it’s interesting to see the consistency of the market over a long period of time.

Since 1987 things changed as Wednesday-Friday gained 17 out of 24 years, with the largest losses occurring in 1987 and 2009. Of course, the market was still feeling the effects of the crash in October 1987. The large loss in 2009 can be attributed to the news surrounding the Dubai debt crisis. Dubai World, one of the Emirate’s largest state-backed companies, sought to restructure $26B in debt for a period of six months, sending shock waves through the markets and crushing the numbers on Black Friday.

Oddly enough, the best percentage gain happened in the middle of the financial crisis in 2008 with the S&P rising 4.33% between Wednesday and Friday. That following Monday however brought the S&P back down to earth, dropping a full 80 points amounting to 8.93% to close at 816.21.

Check out the trends in the following chart to see the history of Thanksgiving Week since 1960. I included the numbers for Tuesday in the chart for perspective, but the point totals and percentage gain columns apply only to the Wednesday-Friday numbers.

Year

Tuesday Before

Wednesday Before

Friday After

Total Gain S&P 500 Points

Total Percentage Gain

S&P 500 Close

1960

(0.21)

0.08

0.33

0.41

0.73%

56.13

1961

0.06

(0.08)

0.14

0.06

0.08%

71.84

1962

0.63

0.36

0.73

1.09

1.77%

61.54

1963

2.77

(0.13)

0.98

0.85

1.16%

73.23

1964

(0.27)

(0.29)

(0.28)

(0.57)

-0.67%

85.16

1965

0.14

0.16

0.09

0.25

0.27%

92.03

1966

(0.42)

0.54

0.64

1.18

1.46%

80.85

1967

1.45

0.55

0.25

0.80

0.85%

93.90

1968

0.78

0.50

0.61

1.11

1.02%

108.37

1969

(0.30)

0.33

0.54

0.87

0.93%

93.81

1970

0.54

0.31

0.84

1.15

1.34%

85.93

1971

0.63

0.17

1.61

1.78

1.94%

91.94

1972

0.68

0.69

0.37

1.06

0.90%

117.27

1973

(2.05)

1.10

(0.32)

0.78

0.78%

99.44

1974

0.64

0.47

0.03

0.50

0.71%

69.97

1975

1.01

0.23

0.30

0.53

0.58%

91.24

1976

0.63

0.45

0.74

1.19

1.15%

103.15

1977

0.84

0.40

0.20

0.60

0.62%

96.69

1978

(0.24)

0.47

0.31

0.78

0.81%

95.79

1979

(0.54)

0.20

0.78

0.98

0.94%

104.67

1980

1.02

0.84

0.35

1.19

0.85%

140.52

1981

1.91

0.54

1.04

1.58

1.26%

125.09

1982

(1.29)

0.95

1.00

1.95

1.45%

134.88

1983

0.79

0.12

0.22

0.34

0.20%

167.18

1984

1.09

0.33

2.41

2.74

1.64%

166.92

1985

0.32

1.87

0.37

2.24

1.11%

202.17

1986

0.72

0.60

0.45

1.05

0.42%

249.22

1987

3.40

(2.29)

(3.76)

(6.05)

-2.52%

240.34

1988

0.99

1.79

(1.77)

0.02

0.01%

267.23

1989

0.24

2.32

2.06

4.38

1.27%

343.97

1990

(4.03)

0.72

(0.93)

(0.21)

-0.07%

315.10

1991

2.62

(1.41)

(1.33)

(2.74)

-0.73%

375.22

1992

2.47

1.60

0.97

2.57

0.60%

430.16

1993

1.90

1.33

0.70

2.03

0.44%

463.06

1994

(8.21)

(0.16)

2.36

2.20

0.49%

452.29

1995

3.39

(1.84)

1.57

(0.27)

-0.05%

599.97

1996

(1.07)

(0.96)

2.02

1.06

0.14%

757.02

1997

4.15

0.82

3.76

4.58

0.48%

955.40

1998

(5.22)

3.88

5.46

9.34

0.78%

1192.33

1999

(16.30)

12.44

(0.46)

11.98

0.85%

1416.62

2000

4.73

(24.99)

19.41

(5.58)

-0.42%

1341.77

2001

(8.40)

(5.63)

13.31

7.68

0.67%

1150.34

2002

(19.56)

25.56

(2.56)

23.00

2.46%

936.31

2003

1.81

4.56

(0.25)

4.31

0.41%

1058.20

2004

(0.30)

4.82

0.89

5.71

0.48%

1182.65

2005

6.38

4.38

2.64

7.02

0.55%

1268.25

2006

2.31

3.28

(5.14)

(1.86)

-0.13%

1400.95

2007

6.43

(22.93)

23.93

1.00

0.07%

1440.70

2008

5.58

30.29

8.56

38.85

4.33%

896.24

2009

(0.59)

4.98

(23.36)

(18.38)

-1.69%

1087.27

2010

(17.11)

17.62

(8.95)

8.67

0.73%

1189.40

So, what does this all mean for Thanksgiving Week 2011? If you go with the history, a good strategy appears to come into the week long and exiting into any signs of strength on Friday. Be careful though, the super committee deadline to trim $1.2T from the budget comes up on Wednesday and all eyes are on the ECB to see how it will respond to the European debt crisis. It remains to be seen how the market will react to these events or non-events.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Trading The Market During Thanksgiving Week