This page has been archived and commenting is disabled.

94% Of The S&P 500's Performance In 2010 Was From Gains On Just The First Trading Day Of Each Month

Tyler Durden's picture





 

And now for today's stunning mutual fund first of the month-day statistic: David Rosenberg notes that "134 points of the 143 points that were racked up in 2010 occurred in the first trading day of each month. That is truly remarkable ? 94% of the entire year boiled down to 12 sessions. And what do you know? 2011 started with a 1.1% pop and has sputtered since." Has trading for humans only been relegated to just 12 times a year when mutual funds invest their previously month's capital allocation in the stock market? Statistically, the trade is to go long at closing on the last trading session of any given month, hold long through next day's closing, and short the remainder of the month.

From David Rosenberg:

One has to really wonder about a stock market (talking about the S&P 500 here) in which 134 points of the 143 points that were racked up in 2010 occurred in the first trading day of each month (see The Trader on page M3 of Barron’s). That is truly remarkable ? 94% of the entire year boiled down to 12 sessions. And what do you know? 2011 started with a 1.1% pop and has sputtered since.

It is truly the nuttiest thing ? the best days last year were the first day of each month (save for June and July) and then after that there were practically no crumbs to nibble on: These are the point changes for the first trading day of each month in 2010, which totals 134 points (as we mentioned above): December +26 points; November +1 point; October + 5 points; September +31 points; August +24 points; July –3 points; June -19 points; May +16 points; April + 9 points; March +11 points; February +15 points; and January +18 points.

Now look at 2011 ? +14 points to kick off the month and year, to close at 1,271.87, and here we are today, after a supposedly ripping ISM and ADP set of numbers, and as of January 7, the S&P 500 is sitting at 1,271.50. Hope you didn’t decide to get in on the second day.

As for bond yields, the nice backup in December, as was the case a year earlier, has set us up again for a 2011 of decent returns. After a bit of a struggle at the onset, we have the yields across the U.S. Treasury curve out to the 5-year maturity (very nice 10 basis points rally there on Friday too), lower now than they were at the end of 2010. The 10-year note yield has also rallied nicely after the opening day selloff. Ignore the masses and stay the course. Bonds still offer decent value with the long Treasury yield now nearly 270 basis points above the S&P 500 dividend yield (you won’t hear that discussed much on Wall Street since broker commissions are driven by stocks, not bonds).

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 01/10/2011 - 12:04 | Link to Comment gwar5
gwar5's picture

OMG

Robottrader just had an orgasm

Mon, 01/10/2011 - 12:18 | Link to Comment unununium
unununium's picture

This is a completely misleading statistic.  About the most you could say it means is that the first day of the month is generally positive.  But to break down the final sum ignoring all the other positive days is BLS-level charlatanism.

Mon, 01/10/2011 - 12:28 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Charlatanism?  It sure looks like real money in my trading account to me.  I better withdraw some to see if you are right.

Mon, 01/10/2011 - 12:37 | Link to Comment Slim
Slim's picture

You make a good point but, although not mentioned in the post, if you look deeper you'll find that these first days are pretty much the very biggest daily moves of the year by a huge margin.

Mon, 01/10/2011 - 14:16 | Link to Comment unununium
unununium's picture

No.  Wrong.  The top 4 were

May 10, May 27, July 7, and June 10 a hair's breadth ahead of Sept 1, the best day 1 of the year.

Sorry, this post ought to be retracted.

Mon, 01/10/2011 - 14:38 | Link to Comment Slim
Slim's picture

Sorry, my mind was in the frame of refernce of the positve year push off the lows not the period before - look at the 2nd half of the year when the market juice mode was in full gear (not so much the vol/down period before that).  Find the largest up days that drove this market until year-end and you'll notice that a number of them are the first days of the month.  This is from memory but you'll find the biggest moves up there. 

Mon, 01/10/2011 - 12:08 | Link to Comment RobotTrader
RobotTrader's picture

Not so hard to understand.

Each month, when the 401(k) contributions roll in, fund managers run helter-skelter to "put money to work" into the highest P/E mo-mo stocks on the Investor's Business Daily Top 100 (now Top 50 as of 2011).

Because anyone found without an outsized position weighting in the top beta flyers...

Their jobs are at risk at quarter end.

So every fund manager is chasing stocks on the first of the month to save their jobs.

Classic "performance anxiety".

Mon, 01/10/2011 - 12:11 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Careful RobotTrader, you're confirmation bias is showing.

Mon, 01/10/2011 - 12:09 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

It's all purely random. In 2010 it was the first trading day of each month. In 2011 it will be something else. Or maybe not. Who knows what those wild and crazy Ponzi addicts are going to do.

See....random.

/sarcasm

Mon, 01/10/2011 - 12:13 | Link to Comment redpill
redpill's picture

Well then it will become the last day of every month because everyone will try to frontrun the first day of the month, afterwhich it will be the second-to-last day of the month... just buy the fucking dip, apparently.

Mon, 01/10/2011 - 13:30 | Link to Comment Whatta
Whatta's picture

In 2010 it was the first trading day of each month. In 2011 it will be something else. Or maybe not. Who knows what those wild and crazy Ponzi addicts are going to do.

 

Yeah, if the game were only that easy. And since it is Their "rules"...I am most confident they will adapt them accordingly so that max pain is inflicted on the sheeple.

Mon, 01/10/2011 - 12:11 | Link to Comment RobotTrader
RobotTrader's picture

Today, its Leo who is having the orgasm....

Solars going wild today off the lows.

No doubt, some fund managers reaching into the "bargain bin" for some cheapies....

Anything it takes to "make their year" in 2011.

Mon, 01/10/2011 - 12:13 | Link to Comment Rider
Rider's picture

Very interesting, traders just have to work 12 days a year!

They can work on POMO days too, if they are in the mood of "overdoing" it a bit.

 

Mon, 01/10/2011 - 12:50 | Link to Comment Careless Whisper
Careless Whisper's picture

NFLX same ol' story

CIEN seems to be on a mission

 

Mon, 01/10/2011 - 12:25 | Link to Comment chancee
chancee's picture

And how much of that was thanks to the futures being ramped during the night?

Mon, 01/10/2011 - 13:52 | Link to Comment EB
EB's picture

About 39%.  Biggest winning time period: lunch, with 8.15 SPY pts.  Worst time: after lunch, before the closing hour.  Makes you wonder what they're serving at the Morgue's cafeteria.

Mon, 01/10/2011 - 15:10 | Link to Comment Triggernometry
Triggernometry's picture

+Awesome

Mon, 01/10/2011 - 15:13 | Link to Comment Common_Cents22
Common_Cents22's picture

Lunchtime for best period makes sense.  The banksters are off for a 5star lunch and martinis while the HFT momo bots keep going.

Mon, 01/10/2011 - 12:26 | Link to Comment SilverIsKing
SilverIsKing's picture

Is the market up on the first day of each month as a result of funds buying or is it up in anticipation of funds buying?  In other words, perhaps the banks and other financial institutions are marking stock prices up before the open so the funds buy at higher prices, i.e. the banks sell their holdings to the funds at inflated prices only to buy back later in the month in order to repeat the cycle again the next month.

 

Mon, 01/10/2011 - 12:43 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

.

Mon, 01/10/2011 - 14:18 | Link to Comment thepigman
thepigman's picture

Bingo....give that man a cigar.

Mon, 01/10/2011 - 12:31 | Link to Comment TimmyM
TimmyM's picture

Can someone elaborate please?

"when mutual funds invest their previously month's capital allocation in the stock market? "

Mon, 01/10/2011 - 12:44 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Many workers have a monthly deduction invested with mutual funds FBO the workers' 401k accounts.

Mon, 01/10/2011 - 12:51 | Link to Comment TimmyM
TimmyM's picture

Thanks, it seems employee contributions would have been a more clear choice of words.

Mon, 01/10/2011 - 12:46 | Link to Comment anony
anony's picture

Really doesn't matter because if you just bought and held last year, even buying in the middle of the month, you'd be up 10%.

What's really happening is that Treasury has made a deal with the top 1-5 Investment bankers over cigars and porn flicks at the Concordiat Club that will hold up the value of major pension and other funds which trade 100 trillion dollars of retirement funds.

For their bonuses, they agree to robo-trade with each other to assure that no significant downside occurs for the next 40 years.  The likes of Jamie and Lord Blankfein agree to not crash the markets no matter what in order to  pay off those retirement accounts gradually over several decades.

Any crash in the market cannot occur unless these IB's sell, sell, sell. Which, if they want their trillions in bonuses and guarantees, they will see never happens.

Have no fear. There is no longer a wall of worry. Only a diaphonous curtain, as see thru as a frontal view of Lady Godiva on her unicorn.

Makes it tough on traders (those not working for the characters who genuinely "make the market") who hope to profit on the fluctuations. 

Whereas the last two years saw an ever decreasing bounce up and down (think: Anna Nicole, nude on a trampoline in 2009) now there will be much less cleavage showing (think: Keira Knightley, in a snuggie on a bed of straw 2011 and beyond).

 

Mon, 01/10/2011 - 12:54 | Link to Comment slaughterer
slaughterer's picture

Robo, can we have some images to go with anony's Anna Nicole and Keira Knightly metaphors?

Mon, 01/10/2011 - 13:09 | Link to Comment Oh regional Indian
Oh regional Indian's picture

be far more telling then to see what happened in July, October and November.

ORI

http://aadivaahan.wordpress.com/2010/06/09/an-older-piece-pertinent/

Mon, 01/10/2011 - 13:16 | Link to Comment HarryWanger
HarryWanger's picture

This is silly. If you bought September 8 or 12 or 16, you're still up since it rises the first of the month. Again, who cares what day it goes up if you keep holding your long positions?

Mon, 01/10/2011 - 14:17 | Link to Comment thepigman
thepigman's picture

Because they're consistently screwing you on the

first day of every month, Wanker. You're arguing

that so what, after they screw you, the trees

grow to the sky. Ridiculous.

Mon, 01/10/2011 - 13:24 | Link to Comment RockyRacoon
RockyRacoon's picture

More of the same.  Just a Ponzi of a different color.   All fools invited to join in the fray.

Mon, 01/10/2011 - 14:15 | Link to Comment thepigman
thepigman's picture

Robot trader is essentially correct, although

I would characterize the phenomenon

as the street offloading stocks to 401K holders

at maximum prices on the first day of

every month. Just a hunch.

Mon, 01/10/2011 - 14:24 | Link to Comment thepigman
thepigman's picture

The 401k buyers get their mutual funds

priced at the CLOSE of business on the

first, so they are screwed out of the

gains that OCCUR on the first. They

pay for those  gains. Get it?

Mon, 01/10/2011 - 14:51 | Link to Comment buzzsaw99
buzzsaw99's picture

Pension fund managers must not be aware of the blatant front running of their trades or esle they bwould not make themselves so easy to hose. [/sarcasm]

Mon, 01/10/2011 - 15:25 | Link to Comment cowboycigarette
cowboycigarette's picture

ralph doudera at http://www.spectrumfin.com/ has been buying the first day of the month for 25 years.

Mon, 01/10/2011 - 16:04 | Link to Comment oogs66
oogs66's picture

just looking at the absolute value of daily changes gives 2264 s&p points.  So all the net change occured on the 12 first days and the rest of that huge volatility was just noise - no wonder i hate myself so often.

Mon, 01/10/2011 - 16:08 | Link to Comment oogs66
oogs66's picture

and if you were just short on the last day of the month you made 68 points and never were down more than 2 pts.  That trade looks even safer than just being long on first day of month as their were some big down moves.  Anyways, just BTFD.

Mon, 01/10/2011 - 17:49 | Link to Comment loup garou
loup garou's picture

Until about 5 years ago, the statistics supported this methodology: “Buy the open on the next to last trading day of the month. Exit on the open of the 5th trading day of the month”.

Newer research came up with this, with the strongest upside bias occurring on the 25th, after 2 or more down closes, above 200-day MA, 5-day hold:

http://www.tradingmarkets.com/.site/stocks/commentary/lcbattlep/When-Do-...

(Not sure why the date reads “September 13, 2010”.  I’ve had it for about 3 years, and found it useful during that time.)

 

I’ve probably posted this one before. It’s an oldie but a goodie:

http://www.tradingmarkets.com/.site/stocks/commentary/lcbattlep/05272005...

(“All the gains, and a great deal more, came from holding the SPYs overnight. And then a good chunk of these gains were lost while the market was open.”)

Do NOT follow this link or you will be banned from the site!