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Macy's Black Friday Slippage Negative Omen For Stocks In December

This article is more than 10 years old.

English: Macy's Department Store in New York City. (Photo credit: Wikipedia)

The performance of the market on Black Friday all by itself is not a reliable indicator for how the market will perform for the rest of the year, but the performance of one single stock on that day might be, namely Macy's . Over the last twenty years shoppers have increasingly sought for, and retailers have increasingly provided, discounted wares that kick start holiday shopping.

During this 20-year stretch of time, the performance of Macy's stock on Black Friday's abbreviated market session seems to have mild predictive value for the S&P 500 during the following month.

When Macy's closes higher than it opens on Black Friday, it predicts that December will do the same with 65% accuracy. Further if Macy's closes higher by more than 0.7% (the stock's average performance for Black Friday over the past twenty years), it predicts that the following December will see the market outperform its own historical average of 1.4%.  

Being able to sort out when December will be a positive month could help investors decide whether their purchase are likely to get a jump start. The results get a little more interesting when you consider just the years that Macy's beat it's own average. This happened five times, and four of those times the S&P rose at a clip of 1.5 % or better during the month of December. 

In November Macy's surprised investors with 30% higher earnings than expected. The stock shot up and continued to rise significantly ever since. However this year Macy's performance wasn't above the 0.7% mark . In fact Macy's actually closed lower so it is possible that investors had already got their stock shopping in early.

When Macy's closes lower for Black Friday it doesn't necessarily imply that the market will do the same. Of the past twenty years' data there are six occurrences of Macy's closing lower for the day. Four of them are followed by positive Decembers, one of them a down year and one of them where December was essentially unchanged. 

Whether contemplating a trade in the S&P 500 or in any one of it's components, it is always it is important to get an idea of the market's overall mood for the week. Here is a look at some key indicators.

Indicator Current Reading
Spy Trend
Bullish + 1 
The SPY Trend continues in pattern of making higher highs and higher lows. The most recent five days appear to be bouncing off support
Trader Stage: Go
ATR Trend
Bullish + 1
The slope of the ATR turned back to a downward trend. Surprisingly, the ATR seems to have taken a sudden steep drop.
VIX Momentum Trend
Bearish - 1
The options market is signaling a more bearish sentiment since the VIX momentum seems to have a steep upward slope.  However, it also seems to be leveling out.
High Volume days
Neutral 0
The volume over the past week shows no above-average days. Relatively low volume this holiday week. Even for a holiday week.
Index Relative Strength Bullish + 1 Investors seem to be showing a preference for risk because the Russell 2000 and the Nasdaq 100 are back on top and seem to have kicked into overdrive. They are skyrocketing up while Dow and S&P seems to be moving up only slightly.
Sector Strength
Neutral 0
Industrials, Cyclicals, and Healthcare are still top. Healthcare seems to be taking a steep dive downward and Technology seems to be making a swift upward trend. While they are still far apart, we may see Technology surpass Healthcare. Utilities is still heading downward at a surprising rate. Energy also looks like it will begin following Utilities.
Overall Score: +2 Bullish