Daily Commentary - Posted on Thursday, September 30, 2010, 5:16 PM GMT +1
The First Session of a Month
In my previous posting ( The First and the Last Session of a Month ) I showed that long-term, but most recently as well, probabilities (for a higer/lower close) and odds are (partly heavily) tilt in favor of lower prices during and at the close of the last session of a month (in this event on Thursday, September 30), despite a positive turn-of-the-month effect.
The SPY was trading below the previous session’s close (in this event the close on Wednesday, September 29) at one point in time during the last session of the month on all of the last 15 occurrences (no opening gap up) – thereof on 11 occurrences at least -1.0% lower – , while it left an unfilled opening gap down (an intraday high below the previous session’s close) on 3 out of the last 15 occurrences, and posted an intraday high greater than +1.0% only once (in comparison to 11 sessions with an intraday low greater than -1.0%).
* At time of writing (11:10am), the SPY has posted (again) an intraday low below the previous session’s close (no opening gap up again), giving back more than +1.0% of it’s first hour gains, in line with previous occurrences.
But quite the reverse applies for the first session of a month.
Table I below shows the SPY‘s historical intraday performance (since 01/01/1990) for the first session of the month on the open (open vs. previous close), during the first hour of the session (1st hr. vs. open), at the start of the last hour in comparison to the end of the first hour of the session (last hr. vs. 1st hr.) – the middle part of the session – and during the last hour of the session.
Historically the first session of a month not only shows a positive bias on the close, there is no weakness during any stage of the day session (probabilities and odds are quite homogeneous).
Table II below now shows the SPY‘s historical intraday performance (since 01/01/1990) for the first session of the month on the open (open vs. previous close), during the first hour of the session (1st hr. vs. open), at the start of the last hour in comparison to the end of the first hour of the session (last hr. vs. 1st hr.) – the middle part of the session – and during the last hour of the session on the last 16 occurrences (month).
Since 6/1/2009 (last 16 month), the SPY closed higher on 12 occurrences (while it closed lower on 12 out of the last 15 end-of-month sessions, thereof the last 6), and posted an intraday high greater than +1.0% on 12 out of the last 16 occurrences (while there was only one intraday high greater than +1.0% during the last 15 end-of-month sessions, in comparison to 11 sessions with an intraday low greater than -1.0%).
And especially remarkable: The SPY left an unfilled opening gap up (an intraday low above the previous session’s close) on 11 out of the last 16 occurrences (first sessions of a month).
Although historically returns for the turn of the month are – or were – significantly above average in comparison to the rest of the month, this is especially owed to the SPY‘s first session of the month. A favorable opportunity on the long side of the market might be provided at today’s (Thursday, September 30) close (especially in the event of a lower close), targeting a (significantly) higher price at least once during tomorrow’s session (October 1, 2010).
Remarks: Due to their conceptual scope – and if not explicitely stated otherwise – , all models/setups/strategies do not account for slippage, fees and transaction costs, do not account for return on cash and/or interest on margin, do not use position sizing (e.g. Kelly, optimal f) – they’re always ‘all in‘ – , do not use leverage (e.g. leveraged ETFs) – but a marginable account is mandatory – , do not utilize any kind of abnormal market filter (e.g. during market phases with extremely elevated volatility), do not use intraday buy/sell stops (end-of-day prices only), and models/setups/strategies are not ‘adaptive‘ (do not adjust to the ongoing changes in market conditions like bull and bear markets).
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