Summary:

• Black Friday has been historically mixed for stocks
• Years 2013 – 2015 brought a correction during the holiday shopping season
• Technical analysis points at imminent resistance 

Thanksgiving day is important to the Americans and Black Friday is important to the markets. It begins a Christmas sales season which is crucial for the retailers and shows economic strength. Given that US indices are at all-time highs we inspect previous years to see if Black Friday has any meaningful impact.

Black Friday is a day that officially begins a pre-Christmas shopping season and on that day retailers try to lure shoppers with some meaningful discounts. In fact the shopping begins online on Thursday, last year people spent above $5 billion on Thursday and Friday online, nearly 18% more than in 2015. As internet shopping surged (especially mobile that registered a 33% increase) a classic “brick and mortar” shopping results were far softer. Nevertheless years 2014 – 2016 were quite solid for the whole season as sales increased 3.9% y/y  after two preceding years with increases below 3% y/y (2014 was especially strong at +5%). For 2017 the National Retail Federations estimates increase of sales of 4% as the economy is running above its potential. In theory, it should be good for stocks so we take a look at previous years to inspect any relationship.

Black Friday could be good for shoppers but not necessarily for stocks. Source: XTB Research

When we take a look at a response of the S&P500 (US500 on xStation5) to the Black Friday shopping euphoria we can see that a) there is no relationship whatsoever between strength of consumer demand and a session on Friday on Wall Street and that b) Friday’s session was not particularly strong anyway given the fact that this a period of a strong bull market.

Holiday shopping season was mixed for US500, 2014 and 2015 brought strong mid-season pullbacks. Source: xStation5 

However, it’s just one day so let’s take a look at a bit longer period to see if a holiday shopping season had any positive impact on the market. Analysing years 2012-2015 we can the market moving up 4 out of 5 times throughout the holiday shopping season – that’s not so surprising given the overall bull market. What’s more, in no year we had a substantial rally during this period of the year. Meanwhile 2014 and 2015 saw relatively large corrections that started just days after Black Friday and 2013 saw a minor pullback as well. Although these losses were at least partly recovered ahead of Christmas it seems that historically investors were looking for Black Friday discounts as well!

US500 – technical analysis

US500 could be looking overbought. Source: xStation5 

Looking at a present US500 chart we can see that prices broke trough an upper limit of an upward channel – a sign of a strong bull market. However, even within a narrower “add-on” channel we are close to another upper limit and a psychological 2600 level. That could pose a serious challenge for buyers. The nearest resistance is at 2560 points.