The Truth Behind The Miraculous "Mutual Fund Mondays" Melt Up

Tyler Durden's picture

It has long been accepted that the stock market performs best on capital inflow days, such as the beginning of the month, or Mondays (also known as "merger" or "mutual fund" Mondays). Specifically, looking at market performance for just Monday's from the beginning of 2010, and comparing it to the cumulative "rest of the week" performance, shows a ridiculous outperformance of 16.7% (just for Mondays) to 1.3% (for the ROW) - a miracle anyone even pretends to trade on all non-Monday days. It is also well understood by now that on days in which there is a subpar trader participation, i.e., low volume, the market tends to miraculously levitate. Yet no one has combined these two studies. Sure enough, we don't think many will be surprised by what we have found. As some of the more jaded may expect, NYSE volume on Mondays should be well below the average. Indeed, that is precisely the case. As the chart below courtesy of John Lohman shows, the market, very counterintuitively considering the outperformance finding above, tends to have its lowest volume on Monday, with all other days of the week trending at around the average. Which begs the question: if everyone traded only on Monday, and the resultant volume increased five-fold, will Monday performance suddenly plunge? Is the only reason for the market's upside asymmetric performance the low-volume Monday-focused activity which leaves the HFT machines to be the marginal buyer, all the while collecting liquidity rebates and not losing money in the process? Is the entire stock market nothing than one Fed liquidity Fed, HFT-whisper volume levitating scam? Is it all really just for show, and the fewer the participants, the more money those who actually brave the ponzi make? We leave it up to readers to make their own conclusions. As usual, we leave with the question: if Madoff's investors knew his "fund" was a pyramid scheme, would they actually pull their capital?



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gwar5's picture

Now you tell me!

whatsinaname's picture

Lately to me all days look the same (Dow up 7 days in a row) as yahoo finance proudly proclaims !! One more feather in their caps.

whatz that smell's picture

screw monday! disney is parabolic!

El Hosel's picture

 .... "One more feather "


 Ancient Chinese fiat fixed market proverb

 "Todays  feather in the cap, is tomorrows bear stool with  cap and feather included"... Good luck round eye.

redpill's picture

Fiday?  That's my buy day?

CU1981's picture





Buy the F'in Rally !!

tellsometruth's picture








redpill's picture

I wonder how all the squeeky wheels on the far left from a few years ago feel now that their messiah is endorsing Bush's Patriot Act.  What more is necessary to shake them from their securely blinded partisan slumber?

JP McManus's picture

I thought he renewed it once already...

tellsometruth's picture


Scout6909's picture


Low volume days are easily manipulated, hence the  "meltup". So, when "IT" finally hits, it will probably be on a Tuesday?

The whole thing (Dow) is embarassing. 


Rainman's picture

....maybe it just snowed every Monday in 2010.

A Man without Qualities's picture

It's actually even more extreme - look at the move between Friday close of the futures and Sunday night open.  Unless the world explodes over the weekend, S&P will be 4pt or more higher.  It's been so blatant - a small trade out of the gate in Sydney.  I reckon at least half of the rise is this out of hours gap up.

Then when you see the returns the pension funds need to match up with the assumptions on solvency, you realize they need to do everything they can.



Rainman's picture

...thanx for the link. The pension funds and their gimmick accounting hide some ugly circumstances. They know 8% is a mega risk bet, but they gotta go for it now. The pension funds are a very large piece in the ponzi puzzle.

In casino parlance this is known as chasing.

InconvenientCounterParty's picture

"if Madoff's investors knew his "fund" was a pyramid scheme, would they actually pull their capital?"

Of course not! Everybody believes there is a greater fool until the music stops.

RockyRacoon's picture

That's the most important take-away for me in the article.

As usual, we leave with the question: if Madoff's investors knew his "fund" was a pyramid scheme, would they actually pull their capital?

The answer is the one for many questions that many analysts and bulls are not asking.  It's the question that scares the crap outta these guys because they know it's their money we're talking about!

alien-IQ's picture

In trying to answer that final and morally challenging question posed at the end of this post...I'll let it be tacked by someone with a greater gift for clarification than I:

An excerpt from: Happy as a Hangman by Chris Hedges

Innocence, as defined by law, makes us complicit with the crimes of the state. To do nothing, to be judged by the state as an innocent, is to be guilty. It is to sanction, through passivity and obedience, the array of crimes carried out by the state.

To be innocent in America means we passively permit offshore penal colonies where we torture human beings, some of whom are children. To be innocent in America is to acquiesce to the relentless corporate destruction of the ecosystem that sustains the human species. To be innocent in America is to permit the continued theft of hundreds of billions of dollars from the state by Wall Street swindlers and speculators. To be innocent in America is to stand by as insurance and pharmaceutical companies, in the name of profit, condemn ill people, including children, to die. To be innocent in America is refusing to resist wars in Iraq and Afghanistan that are not only illegal under international law but responsible for the murder of hundreds of thousands of people. This is the odd age we live in. Innocence is complicity.

The steady impoverishment and misery inflicted by the corporate state on the working class and increasingly the middle class has a terrible logic. It consolidates corporate centers of power. It weakens us morally and politically. The fraud and violence committed by the corporate state become secondary as we scramble to feed our families, find a job and pay our bills and mortgages. Those who cling to insecure, poorly paid jobs and who struggle with crippling credit card debt, those who are mired in long-term unemployment and who know that huge medical bills would bankrupt them, those who owe more on their houses than they are worth and who fear the future, become frightened and timid. They seek only to survive. They accept the pathetic scraps tossed to them by the corporate elite. The internal and external corporate abuse accelerates as we become every day more pliant.

Yo can read the full article here: (it's well worth it)

redpill's picture

Buy Russell 2k on leverage before the weekend, sell it Tuesday morning, it's like free money.  It will keep working until it doesn't.


Tense INDIAN's picture

Apple may see some wild moves downside very quickly....we will se in 2 days...::

redpill's picture

I have a hard time believing PPT will allow the darling of ponzi darlings to suffer too much downside.  Like any.

AccreditedEYE's picture

Tense, it's only a matter of time... AAPL will have its day. When it does, look the F out below as everyone (Hedge and Mutual alike) and their mother owns it.

RockyRacoon's picture

The deepest thought we can muster is how Apple will do?

How disappointing.

whatz that smell's picture

"Is the entire stock market nothing than one Fed liquidity Fed, HFT-whisper volume levitating scam? Is it all really just for show, and the fewer the participants, the more money those who actually brave the ponzi make?"

yes, girlfriend, yes.

check's in the mail, i won't come in your (whatever), and free-markets are free.


Racer's picture

They are delighted to  have cleared out all but HFT so they can do what they want... and as long as the market continues to go up nothing will be done about rapid pulling of orders, which is illegal but they don't care if market is rising.

So as long as the computers push it higher they will get away with, they know if they try to pull it down they will not be allowed and the authorities will be down on them, so they willingly keep to the 'rules' of the con

Mercury's picture

As usual, we leave with the question: if Madoff's investors knew his "fund" was a pyramid scheme, would they actually pull their capital?

Generally people want to be associated with the exclusive money, especially if it appears to be doing well.  Fretting over whether or not it's a scam is much further down the priority list.

Madoff's genius marketing insight was offering the illusion of steady returns and the very real excitement (for many) of having your money co-habitate with that of the celebrity swell set.

On paper Madoff looked pretty legit and he did all the right things.  That was enough for many but not all who kicked his tires.  The Fed is relying similarly on the still solid reputation of the U.S. capital markets and the federal government in general.

RobotTrader's picture

The fact is this.  Way too many guys are still short or stuck on the sidelines in cash.  Market won't go down until these guys throw in the towel and start buying stocks.

alien-IQ's picture

that is some brutally tortured logic.

by that line of thinking then you would imagine that once the word was out that Madoff was running a ponzi scheme EVERYBODY should have rushed in to sign up with him.

duo's picture

RT, what do you think of PCX (Patriot Coal)?  Ramped nicely on the Oz floods.  Still losing money, but more importantly, it has momentum, which seems to be all that matters anymore.

asteroids's picture

What if they just wait for the bond market to punish the guilty? Think the FED can fight a war on two fronts?

10kby2k's picture

Depends on where on the pryamid i was positioned!!!!!!!!!  (Madoff question)

What if Bernanke is doing right and is a genius???  >>>ive claimed i might be going insane<<<

Dollar Bill Hiccup's picture

"Watching with horror and fascination" is about the only way to desribe it. Yet don't forget as someone mentioned above that Friday afternoon also entitles you to any futures gap up on Monday.

Un be fu ** ing leivable, but then again, that wizened little gnome Uncle Alan more or less telegraphed the whole scheme last year. Don't fight the FED.

Robslob's picture

A few factors worth considering Robo:

1) The price continues to get more expensive which requires more capital to buy less...hence the continuously lower volumes

2) Regular folk are priced out of the market and the longer you stay out the easier it becomes to stay out of the market altogether.

3) If or when one entitiy (probably Goldman) decides to throw the first punch it will be a dogfight to get out with no volume hence the price will drop much faster than it went up.

Of course the big boys with their HFT friends will get first / best shot and regular people will indeed get slaughtered or "a.k.a." the grand finale!

Every bull of course will claim they got out in time...the song remains the same.

Waterfallsparkles's picture

Does seem to work like a clock.  Shorts scramble to cover on Friday and the final huge ramp in the last 15 minutes of trading on Friday in anticipation of the Monday parabolic surge in stock prices.

I would love to see statistics on how many times Monday was down over say the last 2 years.  Probably only 2% of the time. If even that.

Short on Tuesday and cover on Thursday morning.  Buy Friday morning and sell Monday at close.  Looks like that is the ticket to profits.

buzzsaw99's picture

Too bad the mutual fund managers don't know they are being scammed or else they would do a better job of protecting investors. [/sarcasm]

Waterfallsparkles's picture

Buzz.  I thought about that too.  You would think that they would stager the investment throught the week.  They end up buying at the high for the week.  So much for letting someone else manage your money.

Pure Evil's picture

The only time you would have wanted out of the Madoff pyramid was a week before it impoded, until that time all was good. But, you would have been lucky to talk Madoff into giving you your money back once you handed any of it over.

Sorta reminds me of the market in general, you want to be in on the scam as it ramps ever higher, until it implodes and the S&P declines back down to 666, unless of course you're one of the miserable bastards that's fighting the fed, and you're all in with nothing but your shorts.

Obaminator's picture

YES...Counter-Intuitivly Markets, Any Market indeed, will tend to Rise in times of Low and Very Low volume. And this story actually spills the beans on Why this is when he asks if the only players on low volume are just in it to pump prices for their own benefit - Bingo.

Here is what happens: When only a few people are trading, they effectively "fix" the price, thus raising their portfolio "value", giving them more leverage to buy yet more. With low volume there can be no large selling of any sort, why? Simple - Those people trading refuse to sell at anythihng less than "X". Period. In fact this can be done for a long long time...a few people trading can actually rise a stock price to astronimical levels far beyond anything the company is even capable of making. This can and will continue UNTIL those people pumping the price higher attempt (someties with fabulous success) to cash out, effectively selling an artifically pumped stock to someone else. Then...with these few players cashed out and inactive, real bids and asks start rolling in...but at those high prices very very few people will bid, and at some point someone hits that "Sell at Market" button, and a bid collapse and flood of selling commenses.

We are witnessing this currently in most equities due to the HFT platforms allowed to run 75-80% of daily trades....what...did you expect to happen...and at a certain point, they will decide its time to "bag the profits".

The cute thing is when they take $1000 and pump it to $1,000,000 sell for $990,000, then wait for the stock to crash and buy out everyone for...$1000...HAHAHAHA!!!

chancee's picture

You're only halfway there.  Now figure up how much of the 'Monday' gains actually came in the pre-market.  At least half.  It's all about SPY and the ES.  Take away those and stocks go nowhere.

yarn wire's picture

does anyone know what percentage of trading days in 2010 were characterized by the markets being up at the open and trading roughly sideways for the rest of the session and what percentage of 2010s total advance do these types of days represent? What I am getting at, or rather curious about, is; what percentage of 2010's SP500 advance might be attributed to merely the market already being up at the open with little to no significant action for the remainder of the session. Also, along these lines of thinking, is there any statistically significant correlation in 2010 between daily trading volumes and the markets ending up or down? 

max2205's picture

Here is an idea BEN. Just have the market open one day a week say monday, do some POMO and pump each weekend. Might as well only let the banks open one day a week say tuesday so we can collect our day trades profits.

Grand Supercycle's picture

Interesting chart for anyone who hasn’t seen it yet:

S&P500 monthly chart January 15 2011

hugovanderbubble's picture

Sell the dip

17th february will change the rule

kummar's picture

Are you really trying to say that these psychics are saying that AIG will survive and continue to be successful they way they were in 2000? Let me know what you have to say, please. My e-mail address is 1998 Toyota Paseo AC Compressor