Tuesday reversals in S&P 500
|July 16, 2012||Posted by Oddmund Grotte under daytrading, strategies|
Some days back I wrote about daily seasonality in S&P 500. As a proxy I use SPY, an ETF. As I have been trading for some years I have noticed there is often a reversal on tuesdays. Actually, this “fact” is well researched over the years. However, I want to measure it myself using my own parameters.
As you can see from the first article, tuesdays are indeed the best day of the week over the last 2,5 years. Tuesdays are very good no matter what has happened before tuesdays. The last 2,5 years have been much better than the years before 2010.
Here are some potential trading tactics:
If today is monday, the close is lower than the previous day (friday), go long at close. Exit on tomorrows close:
|Avg. max next 3 days||1.49||1.22||1.33||1.37||1.77|
|Avg. min next 3 days||-1.55||-1.68||-1.59||-1.62||-1.32|
The column monday consists of the average gain from close on monday until close on tuesday.
If there is two down days in a row we get this results:
|Avg. max next 3 days||1.52||1.35||0.97||1.48||2.09|
|Avg. min next 3 days||-1.62||-1.60||-2.10||-1.56||-1.32|
Now, if today is an up day, we get the following results:
|Avg. max next 3 days||1.26||1.22||1.20||1.11||1.14|
|Avg. min next 3 days||-1.36||-1.34||-1.33||-1.20||-1.20|
If today is the second day in a row up, we get the following:
|Avg. max next 3 days||1.03||1.00||1.33||0.97||1.06|
|Avg. min next 3 days||-1.13||-1.47||-0.98||-1.24||-1.08|
What about intraday strategies?
If monday is a down day (compared to fridays close), then go long at tomorrows open if the market opens down (from tuesdays open). Exit on close:
|Avg. max next 3 days||1.65||1.59||1.07||1.48||2.26|
|Avg. min next 3 days||-1.34||-1.47||-1.83||-1.49||-1.32|
Tuesday is the only profitable!
What happens if the market opens up?
|Avg. max next 3 days||1.50||1.41||0.91||1.30||1.21|
|Avg. min next 3 days||-1.91||-1.15||-1.97||-1.26||-1.40|
Tuesdays are even better when the market opens up!
This is some simple thoughts to consider. One can make many twists with this. For example, only going long on tuesdays if SPY falls from the open.