Monday Overnight Reversal Trading Strategy In The S&P 500 (Short strategy)

Last Updated on January 13, 2022 by Oddmund Groette

Mondays have turned out to be reversal days, at least on the long side after a fall on Mondays or the days leading up to Monday. Letæs test a reversal trading strategy:

In this article, we test a Monday overnight reversal trading strategy in the S&P 500: we go short on a Monday or Tuesday when the close is at a 20-day high. (Update: this strategy has not performed well after 2017.)

The Monday overnight reversal trading strategy:

In plain English the strategy is described like this:

  1. SPY closes higher than the previous 20 day close (not the 20 day high).
  2. Today is either Monday or Tuesday.
  3. Go short at the close.
  4. Exit at tomorrow’s open.

This works for all days except for Thursdays. A pretty similar strategy is the Turnaround Tuesday strategy.

This is the results for Mondays from 2005 until February 2013:

P/L % #fills #wins Avg
8.68232 71 44 0.122286

This is the results for Tuesdays from 2005 until February 2013:

P/L % #fills #wins Avg
5.750533 70 40 0.08215

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