Down Fridays

What an ugly day. Today marked the 142nd time since 1900 that the Dow went down at least 2% on a Friday (when the following Monday was not a holiday). On the following Monday, the Dow has averaged a decline of 0.31%, with positive returns 49% of the time. Since the bear market that started in October 2007, this has happened 6 other times (see table at right). On the following Monday, the Dow has gone down 4 out of 6 times for an average decline of 0.73%. The last two times we've had a >2% decline on Friday, the following Monday has lost 2.42% and 2.63%. Let's hope Monday's trade is a little better than that!

Comments

[jeandit75:]

Investors don't make much money with Hoe I'm afraid

Oct 31 04:21 AM

[jeandit75:]

Investors don't make much money with Hope I'm afraid

Oct 31 04:21 AM

[logicalthought:]

>>Investors don't make much money with Hoe...<<

I like this comment better than the second one... At least with a Hoe you can enjoy losing it!


On Oct 31 04:21 AM jeandit75 wrote:

> Investors don't make much money with Hoe I'm afraid

Oct 31 08:50 AM

[Tom Armistead:]

The Investor's Almanac says down Friday followed by a down Monday is a sign the market is headed lower. If an investor acted on that in October or November last year he would have avoided the decline to March this year.

Oct 31 09:05 AM

[morph366:]

"Let's hope Monday's trade is a little better than that (i.e. not falling another 2%+)"

There are a lot of traders on the short side hoping that Monday will see exactly that kind of follow through... perhaps too many!

Oct 31 11:13 AM

[Ricard:]

This is a good trend indicator, but unfortunately seems to be useful only upon retrospect.

The October and November 2008 drops were already preceded by massive meltdowns in prior weeks and thus only indicates that a trend that had already materialized was given further support.

Unfortunately I cannot say this chart can really predict anything, except that Monday will probably be relatively benign (knock on wood).

Oct 31 11:24 AM

[RATHER FISH:]

As a small trader, without the statstics and with all the manipilation going on ie: computer tradering.. I try to buy MONDAYS or TUES
and sell by FRIDAY. Would like to see a history fo which days since 2004 are buy/sell activity. Any help out there? TIA

Oct 31 12:30 PM

[Aiki14:]

I think the Mutual Fund, fiscal year ending, tax sale was a big factor in yesterdays action and may have represented a large part of the down force. This could make the back looking data less indicative than would otherwise be the case. If I am right and that money comes back in we may see a fair upside Monday. Going to be interesting to see where the futures open tomorrow and where the market opens monday.

Oct 31 03:09 PM

[cstauffer:]

Hedge fund fiscal year end with large unrealized gains over the preceding 6 months means that they most likely felt compelled to lock in those gains ahead of the GDP report in case it came in short. Let's not also forget that the Galleon hedge fund, which I believe was $30 billon was unwound over the last seven trading days or so. On balance, earnings and the economic numbers over the last two weeks did not change the outlook of the economic recovery for better or for worse.

Oct 31 04:10 PM

[logicalthought:]

First of all, hedge funds end their years on 12/31; it's the mutual funds that use 10/31, and if anything, the mutual funds would be more likely to "window dress" and spend money to mark up their year-end holdings, rather than let them get crushed.

Second, Galleon had $3 billion in positions, not $30 billion, and had supposedly unwound almost all of them earlier in the week.

I think there's now a different, more negative tone to this market, and you can see it in the broken charts of the financials, the transports, the Nasdaq and, perhaps, in the S&P 500. I have no idea what happens Monday, but I think the S&P will see the low 900s (if not lower) by year-end.


On Oct 31 04:10 PM cstauffer wrote:

> Hedge fund fiscal year end with large unrealized gains over the preceding
> 6 months means that they most likely felt compelled to lock in those
> gains ahead of the GDP report in case it came in short. Let's not
> also forget that the Galleon hedge fund, which I believe was $30
> billon was unwound over the last seven trading days or so. On balance,
> earnings and the economic numbers over the last two weeks did not
> change the outlook of the economic recovery for better or for worse.

Oct 31 04:31 PM

[cstauffer:]

I think that you will find that many hedge funds do indeed have an October 31 fiscal year end. There is absolutely no data related reason that caused the sell off over the last I was mistaken on the $30 billion figure, it was reported to have been $3.7 billion which was liquidated in its entirety during the days that the market first began to sell off.

I agree that the fact the mutual funds have an October 31 fiscal year end would have very little to do with the abrupt sell off.


On Oct 31 04:31 PM logicalthought wrote:

> First of all, hedge funds end their years on 12/31; it's the mutual
> funds that use 10/31, and if anything, the mutual funds would be
> more likely to "window dress" and spend money to mark up their year-end
> holdings, rather than let them get crushed.
>
> Second, Galleon had $3 billion in positions, not $30 billion, and
> had supposedly unwound almost all of them earlier in the week.<br/>
>
> I think there's now a different, more negative tone to this market,
> and you can see it in the broken charts of the financials, the transports,
> the Nasdaq and, perhaps, in the S&amp;P 500. I have no idea what
> happens Monday, but I think the S&amp;P will see the low 900s (if
> not lower) by year-end.

Oct 31 05:11 PM

[Niner:]

Tho Dow ended the day just 6 points below the 50 period MA. That's close enough for me to say it is sitting on support. Nasdaq and SP 500 both crashed through their 50 period MAs. Both however ended the day in areas of support. Based on all this information I'm going to amend the statement of the guy on PBS to. Some stocks will go up and some will go down.

I'm wondering how many of those Fridays were the last trading day of the month. If I were a betting man, I'd bet the Mutual Funds were dumping. But, in no way was this the only reason for the drop.

Oct 31 05:15 PM

[Niner:]

just answered my own question. Only 2/29/2008 could have been the last trading day and the next Monday was down .06%... Very inconclusive.........

Oct 31 05:18 PM

[HS1:]

"On the following Monday, the Dow has averaged a decline of 0.31%, with positive returns 49% of the time."

So IOW, another worthless 'indicator'

Oct 31 05:41 PM

[MadScientist:]

While I am not challenging your statistics on this, they are far from compelling - half the time it goes up, the other half it goes down a little bit more?

I look instead to volatility as a good measure of the market's likelihood to move in one direction or the other. On Friday the ^VIX went up 23.95%. This percentage increase is very uncommon. In fact, it has only happened 10 other times since 10/01/2007.

So what was the next day performance of the SPX? In 7 out of 10 times, it was up the next day, by an average of +2.24%.

Two days out, the SPX was up 9 out of 10 times, with an average gain of +2.52%.

Perhaps most interestingly, three days out the SPX was down 9 out of 10 times, with an average loss of 3.03% from the close on the day of the VIX spike.

What this tells me is that Monday represents a great short term buying opportunity. In fact, I picked up shares of TNA right at the close on Friday.

By the way, of those 10 instances only two occurred on Fridays, with both having the SPX down fractionally on the following Monday. If this occurs, I'll be adding to my positions with confidence that they will pay out before Thursday.

Nov 01 11:22 AM

[noname69:]

What effect will the bankruptcy of CIT group have on the Markets? I think its playing a role, how much in CDS are going to have to be paid out when it happens? All the big boys are going to have to sell their stocks to pay the piper! Obviously last years break down in the market was the pay off of Lehman and WAMU swaps and I bet that the March sell off was really a preemptive pull out of cash to cover GM's swaps that came due June/July.

Nov 01 12:31 PM

[MadScientist:]

Slight correction: Of the two Fridays where the VIX spiked up more than 20%, one following Monday was down fractionally, the other was up fractionally. Therefore, no bias for this to occur on a Friday.


On Nov 01 11:22 AM MadScientist wrote:

> While I am not challenging your statistics on this, they are far
> from compelling - half the time it goes up, the other half it goes
> down a little bit more?
>
> I look instead to volatility as a good measure of the market's likelihood
> to move in one direction or the other. On Friday the ^VIX went up
> 23.95%. This percentage increase is very uncommon. In fact, it has
> only happened 10 other times since 10/01/2007.
>
> So what was the next day performance of the SPX? In 7 out of 10 times,
> it was up the next day, by an average of +2.24%.
>
> Two days out, the SPX was up 9 out of 10 times, with an average gain
> of +2.52%.
>
> Perhaps most interestingly, three days out the SPX was down 9 out
> of 10 times, with an average loss of 3.03% from the close on the
> day of the VIX spike.
>
> What this tells me is that Monday represents a great short term buying
> opportunity. In fact, I picked up shares of TNA right at the close
> on Friday.
>
> By the way, of those 10 instances only two occurred on Fridays, with
> both having the SPX down fractionally on the following Monday. If
> this occurs, I'll be adding to my positions with confidence that
> they will pay out before Thursday.

Nov 01 12:58 PM

[TraderMark:]

lol


On Oct 31 08:50 AM logicalthought wrote:

> >>Investors don't make much money with Hoe...<<
>
> I like this comment better than the second one... At least with a
> Hoe you can enjoy losing it!

Nov 01 01:35 PM

[shemp2112:]

Good call, not too many others made it. Saw your Video this morning on StockTwits, amazing call on the 100+ points up in todays market. I did not think we'd see it with CIT bankruptcy.


On Oct 31 03:09 PM Aiki14 wrote:

> I think the Mutual Fund, fiscal year ending, tax sale was a big factor
> in yesterdays action and may have represented a large part of the
> down force. This could make the back looking data less indicative
> than would otherwise be the case. If I am right and that money comes
> back in we may see a fair upside Monday. Going to be interesting
> to see where the futures open tomorrow and where the market opens
> monday.

Nov 02 11:16 AM