Seasonality Study by Day of Week & the Employment Situation Reversal Pattern

Do SunSPARC workstations colocated at the NSYE have a preference as to what day they gap up the market?  We attempt to answer this question, in addition to pointing out a very strong pattern on Employment Situation Fridays.

With markets always in flux, it is important to not only be aware of sector rotation, but of time rotation.  As we have demonstrated previously, trends emerge as to which time of day is best to be long or short.  In light of a recent Bespoke Investment Group study regarding bullish Mondays, we have expanded their work to consider both the overnight gap and day sessions for each day of the week…

Mondays have been clearly bullish since September, 2009, with weekend holders of long positions not being punished since the last week of September.  This suggests that traders may have become complacent and that the next down gap could be a bellweather of a material correction.

Tuesdays have been a mixed bag since September, offering no clear edge.

Wednesday has had a slight bullish edge since November, when the gap and day sessions are considered.

Thursday days have been bearish since late October.

The last two Fridays of December were holidays and the one previous was flat.  Prior to that there was a strong surge overnight ahead of December’s Employment Situation report, but then it was dangerous to hold longs from Thursday to Friday morning since late September.  However, Friday days have largely been kind to longs since November, except for on the December Employment report.

As we pointed out in our morning trading report, Employment Situation Fridays have been turning points in 2009.  They have either sparked rallies (except for July) or been used by institutions to sell into, marking interim tops (thought sometimes quite brief).  As we are now at highs, longs should take heed…

Update:

We have compiled the following long term charts that show points accumulated overnight (just ahead of) the Employment Situation report, then during the day session on the day of the report, and the combination of the two. 

 
Above is Feb 94 to Dec 09, and below is a zoom in of Sep 08 to Dec 09.

Comments

[Trifecta Man]

Thanks for sharing your research with us.

For those of you who would rather trade trends than daytrade, just construct a weekly  chart of the QQQQ with a 20-week moving average and use that as a timer.

[Anonymous]

Well, thanks a lot! Now that you've given away the pattern, the Boyz will now proceed to F*ck with the rhythm.
>:-/

[besodemuerte]

Gain 100k jobs and the market flies.

Lose 100k jobs and the market dips, is flat by 11am, then probably ends up positive as usual.

     ***EDIT 1/8/10 4:12pm***

      What did I tell you.  This market is so screwed up the only thing that will derail it is a 1,000,000ton comet from outer space.

     ***END EDIT***

I don't know if your daily analysis really is an idicator of things to come or is rather just a history of the past few months from a different perspective.  I would think the results are purely coincidental.  The market has been melting up forever now, no surprise 4/5 days of the week are bullish.

Interesting chart for Employment Situation Fridays, thank you.  At least we know there will be some movement tomorrow initially, but intuition alone could create that assumption.  Personally, I don't care if we gain or lose, our economy is still in deep shit.  Although, if we gain or are neutral tomorrow on jobs it'll be amusing to see the euphoric media act the fool.