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Is Abnormally Profitable Recent Performance On "Mutual Fund Mondays" Indicative Of Market Manipulation Or Just Herding?
With Erik Hane
Zero Hedge has previously discussed the bifurcation in market performance when comparing regular hour trading with that of the afterhours session, noting that in the September through December 2009 period, the market would have been flat if one were to strip away the benefit of gains after the market closed. Today, we take a look at a different set of data, namely observing a very peculiar market phenomenon associated with the term coined as Mutual Fund Mondays, especially over the past 6 months. Whereas on a long-enough timeline, the market performance on any given Monday (or, more specifically on any given first day of the business week), has averaged to about a 50% win/loss ratio, this is certainly not the case in the September 2009 - March 2010 period. In fact, during this time period, when the broader market has risen by only 10%, the positive contribution from Mondays has been 20%, implying that on all other days of the week the market has, on average, lost 10% in the past 6 months. Furthermore, the win/loss ratio for the first trading day in the last 26 weeks has been 85%: a nearly 3 standard deviations from the norm outlier. Let's dig in.
To analyze this particular data set, we have split up the SPY performance from the past 52 weeks, and have primarily focused on the market performance (as captured by the broad SPDR ETD) on first day of any particular week. We notice two distinct regimes: one from March 1 2009 through the end of August, and a much more aggressive one beginning in September 2009 and continuing through today.
First, below we present is a price/volume chart of the SPY performance in the two periods under consideration.
While market volume is not a topic in this particular discussion, the secular decline as the market has kept going higher has only been interrupted by the brief correction in early February when the market was forced to undergo a breif 10% correction, which forced volume to spike up substantially. Now volume is back to normal.
Yet what we would like to bring your attention to are the following to charts, which scatterplot the performance of any given first week day mapped over time.
First - the period from March through September 2009:
And next, the period beginning September 2009 and continuing through today:
Here are the notable observations:
Between March and September 2009 the broader market increased by just under 50%, between September and March 2010 the market returned just one-fifth, or about 10%. This is well-known to everyone. Yet what may not be well known is that while historically, the win/loss ratio of the first day of any given week averages to 50%, and this is precisely the win/loss ratio for the period March-September 2009 (13 out of 26 weeks positive), the win loss ratio in the September-March interval is 85%, or higher on 22 of 26 Mondays (in some cases Tuesdays when the Monday is a holiday). In fact, the average daily return for "Mondays" in the first interval is a mere 0.09%, while in the second interval it is a stunning 0.75%! In fact, since early December, or 12/7/2009 to be specific, there has been just one "Monday" in which the SPY has closed down. In addition, the bullish performance on 1/19/2010, 1/25/2010 and 2/1/2010 are in stark opposition with the broader bearish downdrift that was taking place in the market during the period from January 15 and February 5. These three days account for 3 of the 5 green days in the this broader trading period.
Looking at this data in aggregate, in the second interval period, the cumulative return of just Monday has been 20%, or double the broader market return of 10%.
This data indicates that traders should buy the market (SPY) just before the open on Monday in the afterhours session (or just before the Friday close for those who have no access to AH trading) and to sell just before market close on Monday. If the trend discussed above persists, two months of this kind of repetitive activity will generate a 20% return all else equal.
And while this observation indicates that due to the high statistically significant nature of this outlier phenomenon the market is possible being nudged between the weekly close and the close of the first day of the following week from September 2009 through today, as there is nobody in regulatory capacity who either cares about this event, or would be willing to take any action against it, the best possible outcome would be for everyone to jump on board with the algo or outright mutual fund buying that is taking place at this time, and simply ride its coattails to power and riches. Then again, as with all technically trending patterns, that have no validation in reality or fundamentals, the persistence of this pattern will only continue until enough market participants spot it, and there is no greater fool to take advantage of on the other side of the trade (except for gullible taxpayers of course, represented in this, and every case, by the Federal Reserve).
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The third graph shows SPY performance to September 2010. I knew Tyler could see the future!
It says 09/04/09. How is that in 2010?
The graph has been updated.
Dammit! If those shitty fundamentals could just be printed out of existence we'd be !@#$ing gravy right now!
The market is going up and as long as that is the case they will turn a blind eye... after all they have probably got their own fat pensions and investments to think about after all.
Now if it was going down...........................
YELL, SCREAM, SHORT BAN RIGHT NOW ban the evil shorters, it is all their fault
yeah, the herd is all awake on Sunday nite at midnite (eastern time) and going full bore Monday a.m. (eastern) around 3 in the morning...isn't everybody in the USA trading futures at that time?
It.is.the.Fed.
That is exactly correct.
I am actually up nights trading 4X at that time and, invariably it seems, at 0300 the SP futures start to track up. How many wonderful short trades have gone out of the money because the NYFed is pumping futures...
This is all such bullshit, it is starting to get a little irritating.
It starts at 02:00 every morning because that is the time the squid & JPM traders have had their coffee and are up and running in London. This whole scam starts in their London offices and reaches out to European index futures as well as the US ones.
yep.....i've already told my broker to let the higher ups know that my trading volumes will go down precipitously. the US equity market has jumped the shark and is actually more of a comedy now than anything else.
not that i care for Dickhead Bove at all, but it does speak volumes that he downgraded GS earnings for the quarter due to lack of volumes.....so, like Cali with their retail ads to buy their shit paper, will we soon be seeing ads by the NYSE to start trading the stock market??
GS to Dick Bove GS 163.61 +5.89
that was hysterical today...i don't think goldilocks has had a move like that in what seems to be ages lol!!
Prediction - Monday 03/08/2010, the market will be down hard!
T-minus 24 days.
Zzzzz
Here we go again. More charts. You are giving me eye strain with all these fucking charts. It's simple. The market is pumped. Done! Give Exel a rest already
Thanks Tyler , I am loading the boat on Sunday nite. Even if Unemployment is 18% and Greece, Spain and Italy all default and Israel attacks Iran...and the Comex defaults on all Gold and Silver futures, China revalues and invades Taiwan....and healthcare passes...regardless I AM A BUYER
The 'Plunge Protection Team' obviously determined weekend pumps give them the best bang-for-the-buck.
I've been involved w/stocks since 1981. Actually, Mondays historically tend to be down more than half the time -- maybe people have too much time over the weekend to worry after reading Alan Abelson in Barron's. So this is indeed notewworthy.
I think what makes this data so dangerous is that it shows that the market is being manipulated. Mutual fund inflows cannot be responsible for this action. When you compare inflows with this action over the same timeframe they are not correlated.
The danger of this manipulation is that it is hijacking price discovery, and will lead to a much more violent drop soon.
I will be curious to see if this data spreads and the "manipulator" takes notice or not.
Without the Eloi the Mordoch would starve. A rising stock market covers all sins.
This is a lousy example of data mining. And in 1965, Thursdays were the huge winner. Wowwee! Meaningless.
It COULD be data mining, but nothing in your post proves it is.
I do think it's pretty damn bizarre, frankly, and just dismissing it as data mining is premature at best.
No sir. This is statistical analysis.
Data mining is a quite different animal.
take a look at the emini actions on sunday nite through monday 8 a.m. eastern. there are some very interesting green candles.....
Yep. For me, the work week starts at 6 PM ET on Sunday night, when the futures open for business. I supposed I'm just inured to it by now, but it's still frustrating to see.
Thank you for reporting on this. It is so obvious. I was wondering how many up Mondays there were verses Down Mondays.
This really shows that someone wants to goose the Market at the begining of the week to keep everyone in the game.
Thank you for reporting on this. It is so obvious. I was wondering how many up Mondays there were verses Down Mondays.
This really shows that someone wants to goose the Market at the begining of the week to keep everyone in the game.
Hmmm, so this has been obvious for some time now and is only becoming more blatant. What happens when shorts are banned or restricted or simply no longer in play and the Friday sell off begins in prep for the Monday pump? Would seem to have the potential of swamping the boat as everybody heads to the same side? Things like this can lead to things like '87's crash?
This is setting up Black Monday II.
http://funy1.blogspot.com/
I am continuing the research tonight. I have had too many people that I respect be skeptical of the importance of this data. I plan on gathering the data from Tuesday, Wednesday, Thursday, Friday of that same time period so we can get an even clearer picture of the manipulation taking place here. I will also gather data from other bullish time periods as a comparison.
I don't know how to investigate the futures or e-minis. Is someone else able to do that? Of particular importance would be a comparison just like the one above.
Once I have all the data together, I will send it to Tyler. I plan on having this done by tomorrow.
-Erik
After hours daytraders waiting for AH Earnings reports on "darling" bubble stocks, lol.
Day traders are nothing but gamblers who are too stupid to learn how to play online poker!
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