Many market participants believe simple phenomena in the stock market are purely random events and cannot recur consistently.
Indeed, there is probably no stock market rule that will remain valid forever.
However, there continue to be stock market phenomena – even quite simple ones – that tend to persist for very long time periods.
What I examine in today’s report represents such a phenomenon: the performance of the S&P 500 Index on individual days of the week.
Tuesday is a particularly strong trading day, Friday a weak one
The chart below shows the annualized performance of the S&P 500 Index since the turn of the century in black, as well as the cumulative annualized return generated on individual days of the week in blue.
I have measured the price changes from close to close; thus the performance of e.g. Tuesday, represents the difference between the close on Monday and the close on Tuesday.
S&P 500 Index, performance by individual days of the week, 2000 to 2017 – annualized
Friday is on average a down day. Source: Seasonax
As you can see, two days are standing out in terms of positive performance: Thursday, and particularly Tuesday. The cumulative return of the stock market on Tuesdays alone was actually better than that achieved on all five trading days combined!
By contrast, Friday was on average quite weak. On Mondays and Wednesdays, the market by and large tended to move sideways.
The difference, which was measured over no less than 4,436 trading days, is quite significant. This suggests it is unlikely to merely be a random phenomenon.
What do these data look like in specific market environments though, i.e., during bull and bear markets?
The days of the week under the microscope
The next chart shows the performance of the S&P 500 Index since the turn of the century in black, as well as the cumulative return achieved on individual days of the week in other colors – all indexed to 100.
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