Investing with the Trend: A Rules-based Approach to Money Management

Chapter 7Market Facts: Bull and Bear Markets

The farther backward you can look, the farther forward you are likely to see.

Winston Churchill

Calendar versus Market Math

There are 365 calendar days per year (365.25 for leap year consideration). There are five market days per week, so five-sevenths of 365 = 260.7 market days per year. Of course, to include leap year using the same methodology, five-sevenths of 365.25 = 260.9 market days per year. Hence, either 260.7 or 260.9 will round to 261 days per year. Next we need to adjust for market holidays, 261 days – 9 holidays = 252 market days per year. Market holidays (Table 7.1) were obtained from the New York Stock Exchange website.

New Year’s Day	January 2
Martin Luther King Jr. Day	January 16
Washington’s Birthday	February 20
Good Friday	April 6
Memorial Day	May 28
Independence Day	July 4
Labor Day	September 3
Thanksgiving Day	November 22
Christmas Day	December 25

TABLE 7.1 Market Holidays (2012)

Stock Exchange Holidays

So now we know that there are 252 market days per year. If we divide that by the number of months per year (12), 252/12 = 21 market days per month. Hence, dividing market days by 12 will yield calendar months.

With this knowledge, we can then determine moving average, ratio, or rates of change values such as:

1. 1 month = 21 market days (for a month you would use 21, not the normal 30/31 days in a month).
2. 3 months = 63 days.
3. 9 months = 189 days (close to the ubiquitous 200 days).