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Are Torrid Tuesdays The New Merger Mondays?

Submitted by Tyler Durden on 12/20/2011 18:16 -0400

While there is nothing quite like using correlation to imply causation, or predicting the future by observing self-fulfilling prophecies which work until they wipe everyone who blindly follows them, investors do enjoy observing technical patterns that lead to at least some incremental and tranistory beta. Especially in this day and age of centrally planned alpha disintegration. And while many have noted historical phenomena which used to work in the old days, such as the "Merger Monday" effect, this was before the Obama administration decided it would be the best and last arbiter of what transactions should and shouldn't work. As a result, Merger Monday were promptly forgotten. Also promptly forgotten were POMO days (at least for now), as every Fed bond purchase, has an equal and offsetting bond sale (inverse POMO). Granted once the Fed starts monetizing Italian bonds this will quickly change. But what about now? Well, as a trading desk advises us, using 2011 statistica data, "Torrid Tuesdays" just may be the new "Merger Monday."

To wit:

Looking back to 2011, Tuesday is a great day to own the Russell. Average move in the Russell on Tuesdays this year has been 43bps. This is a huge move, corresponding to 22% annualized return. If all you did all year was to buy the IWM on Monday at close and sell it Tuesday at close you would have made a 20% return.

4 out of the 11 times the Russell moved more than 4% in a day were on Tuesdays, including the two best days in the Russell (8/9 up 6.9% and 10/4 up 6.4%).

Conversely, there were no Tuesdays when the Russell was down 4% or more (out of 7 such days).

Of course, now that it is public, using the old faithful precepts of the wave function collapse, this self-fulfilling anomaly will no longer work. Or maybe it will work that much better if even more momo chasers go after it. Who knows? Anyone crazy enough to want to put even a dollar of their money at risk in this joke of a market is welcome to try it. The rest of us will sternly contemplate the age old question: just how will the world grow when the marginal utility of debt is below 1, when capex is far lower than D&A, when asset bases do not generate enough cash flows to satisfy liabilities, and when the only solution is inflating our way out of every troublesome spot.

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Tue, 12/20/2011 - 18:18 | 1999128 Goldilocks

Merry Christmas & happy holidays everyone…

Be well ya’ll. ;-)

Tue, 12/20/2011 - 18:40 | 1999180 Potemkin Villag...

Festivus for the rest of us

Tue, 12/20/2011 - 18:50 | 1999198 Goldilocks

new SGTbull07 interview with Jim Willie...

~//~

MUST LISTEN: JIM WILLIE '20 Lehmans Flash Event & Libyan Gold' - Part 1 of 3
http://www.youtube.com/watch?v=Cq1CbP-a2ao&feature=player_embedded

MUST LISTEN: JIM WILLIE 'Comex Shortage & the MF Global Farce' - Part 2 of 3
http://www.youtube.com/watch?v=erJhPw4XUG4&feature=player_embedded

MUST LISTEN: JIM WILLIE 'Operation Twist & Global Quantitative Easing' - Part 3 of 3
http://www.youtube.com/watch?v=suNMBjJG_mA&feature=player_embedded

Tue, 12/20/2011 - 19:03 | 1999254 HedgeAccordingly

Merry Christmass.. take your 12 apple points and put them under the pillow - http://bit.ly/ugN5md

Tue, 12/20/2011 - 18:20 | 1999136 Stoploss

................... every troublesome spot. Until gold reclaims it's rightful status.

Sorry, had to throw that in there. Don't hate da playa, hate da game.

Tue, 12/20/2011 - 18:27 | 1999150 Dollar Bill Hiccup

Hasn't "Turn around Tuesday" been a Minyanville mantra for quite some time?

Tue, 12/20/2011 - 18:39 | 1999174 emsolý

Marginal productivity of debt is negative, not just below 1....!

Tue, 12/20/2011 - 18:41 | 1999182 Steaming_Wookie_Doo

I still like ZH's Double Penetration Wednesdays the best

Tue, 12/20/2011 - 18:44 | 1999183 Potemkin Villag...

"Turn around Tuesday"

My theory is that is has something to do with the fact that Wimpy promised to pay you on Wednesday for the hamburger he got last week (on credit)...

I'm guessing Bernanke was his roommate at Princeton...

Tue, 12/20/2011 - 18:50 | 1999211 HughGRection

It's all overanalysis. A day like this, whether a Tuesday or not, shows we're still in a bear market. You only get rip-your-bear-face-off rapid rises like this in a bear mkt. We'll probably head up to the 200d MA & reverse, maybe we won't even get there.

Tue, 12/20/2011 - 18:50 | 1999212 HughGRection