Tuesday reversals in S&P 500

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:

Monday Tuesday Wednesday Thursday Friday
Average 0.09 0.11 -0.06 -0.11 0.12
#Fills 51 55 61 56 54
#wins 26 33 31 28 31
Max 4.66 2.82 4.49 2.49 4.40
Min -3.09 -2.95 -3.77 -2.62 -6.51
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:

Monday Tuesday Wednesday Thursday Friday
Average -0.06 0.10 -0.65 -0.13 0.23
#Fills 22 27 22 29 28
#wins 8 16 6 15 16
Max 4.66 2.82 1.32 2.06 4.40
Min -2.78 -2.95 -3.77 -2.52 -6.51
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:

Monday Tuesday Wednesday Thursday Friday
Average 0.18 -0.04 0.11 -0.01 0.02
#Fills 63 74 69 72 72
#wins 38 34 41 46 40
Max 3.30 4.11 3.49 1.90 2.87
Min -2.35 -4.42 -4.69 -3.52 -2.00
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:

Monday Tuesday Wednesday Thursday Friday
Average 0.08 -0.14 0.16 -0.07 0.00
#Fills 37 42 35 41 45
#wins 21 18 22 24 25
Max 1.81 4.11 1.93 1.48 2.12
Min -1.95 -3.69 -2.20 -3.52 -2.00
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:

Monday Tuesday Wednesday Thursday Friday
Average -0.12 0.17 -0.13 -0.11 0.00
#Fills 21 31 25 27 25
#wins 12 14 11 17 12
Max 1.92 3.68 0.99 1.18 3.02
Min -3.98 -1.82 -1.54 -2.86 -1.79
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?

Monday Tuesday Wednesday Thursday Friday
Average -0.10 0.28 0.16 -0.04 -0.15
#Fills 27 29 29 32 30
#wins 14 18 18 14 12
Max 1.61 2.99 2.08 3.59 1.24
Min -2.12 -1.45 -2.99 -2.36 -1.51
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.