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In my last posting ( see Martin Luther King, Jr. Day Week ) I showed that the S&P 500 shows a remarkably negative bias during Martin Luther King, Jr. Day week (celebrated on the 3rd Monday in January), but due to the fact that it had been added to the list of exchange holidays not earlier than 1998, the number of occurrences is limited.

But next week will be January's option expiration week as well, which not necessarily overlaps with Martin Luther King, Jr. Day week (it only overlaps if the first day of January is a Saturday, a Sunday or a Monday in this event No. of Sessions is '4' in Table I below).

Table I below shows all occurrences (since 1974 ; in 1973 standardized exchange traded call options were released for trading by the Chicago Board of Options Exchange (CBOE) and the Options Clearing Corporation (OCC)), the S&P 500′s performance during January's option expiration week, the number of sessions, the maximum gain and maximum drawdown - on a close to close basis - during the period under review, and the day of the week where the index posted it's higher and lowest close in the past.

+ no close below trigger day's close during period under review
- no close above trigger day's close during period under review

It is interesting to note that January's option expiration week has been a down-week for the S&P 500 on the most recent 6 , on 8 out of the last 9 and 10 out of the last 12 occurrences.

Conclusions:

If the market is really 'due' for a short-term correction, the next week might provide a favorable (seasonal) opportunity for the bears.

Successful trading,