“Trade the First Day, then Stay Away”
This morning, the WSJ reports on a new trading pattern: First day of the month rally:
“Some traders have been adopting a new ritual in recent months—buying early on the first day of the month and selling by the day’s close—taking advantage of a peculiar phenomenon that has seen the Dow Jones Industrial Average rise substantially on the first day of each month. That one-day move often has accounted for much of the Dow’s gains for the entire month.”
The article points to a likely source of the rally: Manufacturing data. It typically is released on the first day of the month. And, given the weak US Peso, “The manufacturing sector has been one consistent source of positive surprises during the economic recovery.”
Futures are strong this morning, with the SPX up 6, and the Nasdaq at plus 14, so yesterday’s rally does not look to be taking any steam out of the idea — yet.
These things tend to become self-fulfilling prophesies, at least for a while.
But one suspects that as these patterns become more widely understood, traders will anticipate them, and pull the gains forward. The Journal noted that the “last five days of the month have tended to see declines,” but I suspect that may no longer be the case (as yesterday’s rally showed).
Regardless, it is a phenomena that is worth watching . . .
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Source:
Much of Month’s Move Is on First Day
JONATHAN CHENG
WSJ, MARCH 1, 2011
http://online.wsj.com/article/SB10001424052748703749504576172862754957434.html
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March 1st, 2011 at 7:03 am
so i guess, I will short the rally at the end of the day :)
March 1st, 2011 at 7:54 am
what happens the last day of QE?
Fundamentals are so 90s…
March 1st, 2011 at 8:08 am
[...] The new hotness for traders is to just buy the first day of the month. (TBP) [...]
March 1st, 2011 at 8:31 am
My chart says that since Sept. “staying away” was bad idea. Good time to remember Baruch’s (or was it Morgan’s) sage advice about the market “It will fluctuate”.
~~~
(BR: JPMorgan)
March 1st, 2011 at 8:34 am
Based on the past year or so, an argument might be made for buy and hold being the best strategy for maximum gains for participants in the stock market . Investing long term — what a novel idea (strange that “long term” would now appear to be anything outside day trading).
Despite the fact that we can clearly see that the markets are a game of musical chairs, played on a global scale, and that the fundamentals and functionality of our broader economy are compromised beyond repair, the confidence of the investing public builds with each positive closing day/week/month. A confident mark is the key to any good fleecing.
Look around. Are you big enough to wrestle a chair from the other players when the music stops? Do you even have the ability to liquidate your “holdings” on demand? If you are able to liquidate them, what will you trade them for? Dollars?
Nothing has changed for the better. The debt mounts, the fraud continues, and the lazy, complacent and doughy middle class is crushed downward without a struggle — too intellectually weak and morally retarded to preserve themselves.
The key to successful trading in the markets is to trade on the first day of the month, and then stay away. You can take it to the bank.
In fraud we trust.
March 1st, 2011 at 9:20 am
Now that someone has put it in writing in a public place, it will no longer be true. Sell the open. Buy at close.
March 1st, 2011 at 9:50 am
[...] 1st Day of the Month Trading By pregamingthemarket From the WSJ via Ritholtz: [...]
March 1st, 2011 at 10:04 am
Also, while we are at it talking about rallies, can CNBC and others please stop extolling Doug Kass as someone other than a guy who got lucky? The man stated in January that gold was heading down and would touch 1100 and that silver was a bearish bet. Since then, gold is now close to a new high and silver is pushing towards 35 bucks. He represents what was once posted here about the more accurate your predictions once, the worse you get in the future because you start taking bigger and bolder bets ala Nouriel Roubini.
March 1st, 2011 at 10:42 am
This post might turn out to be like a Times cover for this trade….although the day is not over yet.
March 1st, 2011 at 10:52 am
” traders will anticipate them, and pull the gains forward” they moved the profit taking forward to 9:03 today!!
March 1st, 2011 at 11:59 am
Jinxed this one, it seems.
March 1st, 2011 at 12:20 pm
@ashpelham2:
But everyone will be saying this now, so it will be true again. And everyone will draw this same conclusion, so it won’t be true after all. However, everyone … Oh, that’s too confusing.
March 1st, 2011 at 1:22 pm
So much for that strategy….
March 1st, 2011 at 1:54 pm
Maybe it already has been pulled forward to the last two trading days of the month.
March 1st, 2011 at 2:18 pm
The pattern was reported two months ago. This new WSJ is reporting old news as news:
http://www.greenfaucet.com/the-market/94-of-the-s-p-500s-performance-in-2010-occured-on-the-first-trading-day-of-each-month/82074
March 1st, 2011 at 4:19 pm
Nice jinx BR, Is this a Kadaffy pull back or labor #’s?
March 1st, 2011 at 5:02 pm
I never thought of a post on the BP as a “contrarian play” until today!
March 1st, 2011 at 5:16 pm
I suspect this had all been planned out by Barry beforehand. He just wanted to close some short positions at the end of the day today before the next bounce. ;-)
~~~
BR: No shorts (a lil QID), but 50% cash
March 2nd, 2011 at 3:14 am
[...] – “Trade the first day, then stay away“. [...]