Patterns drift in and out of existence on Wall Street – the trick is finding something that is relatively stable over a long period of time. Seasonal patterns are a favorite of commodities traders – and generally these patterns are easily identifiable and explainable. Agricultural commodities have obvious patterns that are impossible to ignore when trading – crops are seasonal. Add in unpredictable events like too much rain, too little sun, etc – you get some exciting markets.

So, some patterns in commodities are pretty obvious and explainable. What about stocks? Do stocks show any seasonal patterns? Back in 1996, I was playing with OEX data and happened upon an interesting seasonal pattern. At the time, the pattern turned out to not be tradable – I way playing the options market at the time. In my mind, I had called it the “Halloween Week” pattern or something similar to that name. What I saw then was a positive upside bias in the OEX during the week of Halloween. I filed it away as an interesting pattern, but ultimately not tradable.

Fast forward to 2006. I am not sure what triggered the memory of that pattern, but certainly the approach of Halloween helped bring this pattern to mind. Patterns really do drift in and out of the markets – often because they are exploited out of existence. Ten years is a long time in the markets, so I was not certain if this pattern would still exist. I doubt this is exploitable, but fun to look into.

I have stock data going back several decades, so I wrote up a quick program that looked at the average percentage movement over five trading days and captured this information for every day of the year. Take the open price on trading day one and find the closing price on trading day five – giving us five full trading days. Why five days? It pretty much covers a “week” of trading, but still the selection of five days was arbitrary on my part. When looking at stocks over the price of five dollars, here are the top ten highest percent time periods:

Month	Day	5 Day % Move
10	28	3.04
10	27	2.84
10	30	2.83
12	26	2.81
12	21	2.47
10	26	2.27
10	29	2.25
12	22	2.07
12	24	2.07
12	23	2.06

Historically, if you were to buy the “the market” (this is an average % move of all the stocks over $5.00) at the open of 10/28, you would see an average % move of about three percent over the next five trading days.

I see two strong patterns – one is the “Santa Clause rally” that is famous in stock market lore – beginning December 21 and pushing to the end of the trading year. The other seems to be a “Halloween Rally” – from October 26 on past Halloween. Why the end of October? Golly – you got me, I can’t really come up with any good logical arguments as to why this pattern has developed. I was a bit surprised that it continues to show a strong bias to the positive – even ten years after I first encountered the pattern. Originally, I saw this pattern in just OEX data, but this analysis was using all individual stocks over the price of five dollars – yet another interesting twist.

So, it seems that the famous Santa Claus Rally has a close competitor – the Halloween Rally – keep an eye on the markets and see what happens this year.