One old market adage commonly mentioned ahead of the Jewish holidays is "Sell Rosh Hashanah, Buy Yom Kippur." With the holidays commencing Friday at sundown, it's time for this year's investment interpretation of the adage from the perspective of this investor.

The 2020 version is much more difficult to analyze than in years past for a few different reasons.

Historical Origin

The rule's origin is based on the concept that followers of the Jewish faith want to be free from material possessions during the most sacred period of the calendar year.

During the 10 days between the two major holidays, Jews reflect on their actions from the previous year and atone for their sins while setting a new agenda for the upcoming year.

Upon completion of the cleansing process, they're free to return to the markets and evaluate investments for the upcoming year. Those who are ultra-religious may abstain from the markets altogether during this period.

Mixed Results Over The Long-Term

No trading adage or strategy is 100% accurate over time. In 2019, following the original adage was a winning strategy.

Based on the closing price of the S&P 500 cash index, if investors had exited the market on the close of Sept. 30, 2019 — Rosh Hashanah commences at sundown — at a closing price of 2,976.74, they would have been able to reestablish their longs in the index at a lower price of 2,918.

During the period between Rosh Hashanah and the conclusion of Yom Kippur, the trading day after the second day of observance, the index declined nearly 2%, so investors following the adage true to form would have had to establish their long at the lower Oct. 10 opening price of 2,918.55.

Holding that long until Thursday’s closing price (3,357.01), would have yielded a 15% return if one was able to maintain it during the market correction.

Holding that long for the entire year, one would have to had stomach the COVID-19 crisis earlier in the year. Based on the index's current price (3,352), an investor would have a nearly 15% gain if one was able to maintain it during the market correction.

Really Tough Call In 2020

There's no doubt this the kind of year that we haven't experienced in a long time, perhaps akin to the early 2000s dot-com bubble or the financial crisis in 2008.

The big difference is the remarkable rebound the index has had in such a short period of time under extraordinary circumstances. Whether of the Jewish faith or not, any long-term investor that held through the March Madness has to be leery of market at its current level.

This year the timing of the holidays and events surrounding it make it more convoluted than in previous years.

Rosh Hashanah Comes On The Exact Day Of Quadruple Witch Expiration

Depending on the Jewish calendar, the holidays can be as early in the first few weeks of September or be as late as mid-October. On most occasions, the Rosh Hashanah holiday comes before the quarterly event and Yom Kippur either before or shortly after.

However, this year the Jewish New Year commences at sundown on Friday, hours after the volatile expiration takes place. Along these lines, the 10 or so days preceding the expiration the rollover of the futures contracts creates excessive volatility and “air pockets” in the index, a phenomenon we're witnessing firsthand over the last several sessions.

Volatility Is Not Going Anywhere

Historically, September and October tend to be volatile, with the 1929 and 1987 crashes both coming in October. More importantly, the uncertainty of upcoming election results, violent protests across the U.S., raging wildfires coupled with a few hurricanes, it's hard to be extremely bullish over the next few months.

Last but not least, a global pandemic that has yet to be fully contained and a vaccine not on the immediate horizon, ravaging several parts of the U.S. economy while taking thousands of lives.

Even though the index has retreated from its all-time high as of late, from where it was at the March lows, it may not a bad idea to “sell” Rosh Hashanah and not blindly “buy” Yom Kippur.