It's That Time Of Year When Traders Talk About The S&P 5-Day Rule (2024)

It's That Time Of Year When Traders Talk About The S&P 5-Day Rule (1) It's That Time Of Year When Traders Talk About The S&P 5-Day Rule (2)
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There are a lot of "rules" in the stock market that don't seem to die because more often than not, they work.

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Take for instance the S&P 5-day rule, which comes from the Stock Market Almanac. According to the rule, the S&P 500 ends the year positive if it ends the first five trading days of the year positive.

It has worked between 80 to 90 percent of the time.

And it worked last year.

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And according to Art Cashin, UBS Financial Services Director of Floor Operations, traders are chatting about it again.

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From this morning's Cashin's Comments:

What Does Wednesday's Rally Indicate? – Lots of folks tried to extrapolate Wednesday's rally to indicator status. As Steven Russolillo of the WSJ notes, the predictability provided by the action of the first trading day of the year is about the same as a coin flip – it's right 50% of the time.

The first five days of trading, however, have a more discernible record. According to the very helpful Traders Almanac, the last 39 times the market rose in the first five days, it closed up on the year 33 times (84.69%). So stay tuned.

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It's That Time Of Year When Traders Talk About The S&P 5-Day Rule (6)

It's That Time Of Year When Traders Talk About The S&P 5-Day Rule (2024)

FAQs

What is the 5 day rule for the S&P? ›

According to the rule, the S&P 500 ends the year positive if it ends the first five trading days of the year positive. It has worked between 80 to 90 percent of the time.

What is the best time to trade the S&P 500? ›

As S&P 500 companies trade on the NASDAQ and New York Stock Exchange, traders like to trade the S&P 500 index during main market hours between 09:30 and 16:30 EST. Trading during these hours often offers greater liquidity and tighter spreads.

What is the 3-5-7 rule in trading? ›

A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.

What is the return of the S&P YTD in 2024? ›

S&P 500 Year to Date Return for 2024
YearTotal ReturnPrice Return
20247.997.50

What is the 5 rule in the stock market? ›

The rule suggests that you should not invest more than 5% of your portfolio in a single stock. The idea behind the rule is to minimize the risk of losing a significant portion of your portfolio in case the stock performs poorly.

What is the 15 15 rule in stock market? ›

What is the 15x15x15 rule in mutual funds? The mutual fund 15x15x15 rule simply put means invest INR 15000 every month for 15 years in a stock that can offer an interest rate of 15% on an annual basis, then your investment will amount to INR 1,00,26,601/- after 15 years.

What is the 11am rule in trading? ›

It is not a hard and fast rule, but rather a guideline that has been observed by many traders over the years. The logic behind this rule is that if the market has not reversed by 11 am EST, it is less likely to experience a significant trend reversal during the remainder of the trading day.

Does Warren Buffett recommend the S&P 500? ›

Berkshire Hathaway CEO Warren Buffett has regularly recommended an S&P 500 index fund.

Should I invest $10,000 in S&P 500? ›

Assuming an average annual return rate of about 10% (a typical historical average), a $10,000 investment in the S&P 500 could potentially grow to approximately $25,937 over 10 years.

What is 90% rule in trading? ›

The 90 rule in Forex is a commonly cited statistic that states that 90% of Forex traders lose 90% of their money in the first 90 days. This is a sobering statistic, but it is important to understand why it is true and how to avoid falling into the same trap.

What is No 1 rule of trading? ›

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade. A decent trading plan will assist you with avoiding making passionate decisions without giving it much thought.

What is the 90 90 90 rule traders? ›

There's a saying in the industry that's fairly common, the '90-90-90 rule'. It goes along the lines, 90% of traders lose 90% of their money in the first 90 days. If you're reading this then you're probably in one of those 90's... Make no mistake, the entire industry is set up that way to achieve exactly that, 90-90-90.

What is the 5 year return of the S&P 500? ›

S&P 500 5 Year Return is at 85.38%, compared to 83.02% last month and 55.60% last year. This is higher than the long term average of 45.20%. The S&P 500 5 Year Return is the investment return received for a 5 year period, excluding dividends, when holding the S&P 500 index.

What was the S&P 500 return last 3 years? ›

S&P 500 3 Year Return (I:SP5003YR)

S&P 500 3 Year Return is at 32.26%, compared to 33.72% last month and 58.99% last year. This is higher than the long term average of 23.25%. The S&P 500 3 Year Return is the investment return received for a 3 year period, excluding dividends, when holding the S&P 500 index.

What is the S&P 500 past 10 year return? ›

Basic Info. S&P 500 10 Year Return is at 180.6%, compared to 174.1% last month and 161.9% last year. This is higher than the long term average of 114.4%.

What is the rule of 72 S&P 500? ›

If the index rises at its historical average of around 10%, you'd double your money in about 7.2 years (72/10 = 7.2). If you believed that the S&P 500 is more likely to return, say, 15% due to strong earnings, you'd double your money in 4.8 years (72/15 = 4.8).

How long does a company stay in the S&P 500? ›

A recent study by McKinsey found that the average life-span of companies listed in Standard & Poor's 500 was 61 years in 1958. Today, it is less than 18 years. McKinsey believes that, in 2027, 75% of the companies currently quoted on the S&P 500 will have disappeared.

What are the rules for S&P 600? ›

The S&P SmallCap 600 Index (S&P 600) is a stock market index established by S&P Global Ratings. It covers roughly the small-cap range of American stocks, using a capitalization-weighted index. To be included in the index, a stock must have a total market capitalization that ranges from $1 billion to $6.7 billion.

What is the 10 5 3 rule of investment? ›

According to this rule, stocks can potentially return 10% annually, bonds 5%, and cash 3%. While these figures are not guarantees, they serve as a guideline for investors to forecast potential returns and adjust their portfolio accordingly.

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