First Trading Day of the Month: Another 1% Gain?
Monday, February 28, 2011 at 02:55PM 
Tomorrow marks the start of a new month, and the big question once again for traders is will the recent trend of rallies on the first trading day of the month remain in place? Since the start of 2010, the S&P 500 has finished the first trading day of the month higher in twelve out of fourteen months (86%). Additionally, the S&P 500 has risen more than one percent on the day nine out of fourteen times (64%). Since the start of December, there have been five days where the S&P 500 was up more than 1%, and three of those came on the first trading day of the month.
The first trading day of the month has had such a large impact on the equity market recently that if it wasn't for that day, instead of being up 18.3% since the start of 2010, the S&P 500 would only be up 2.3%! In the chart below, we show the performance of the S&P 500 since 2010 and break out the returns based on just the first trading day of the month as well as all days except the first trading day of the month. As shown, nearly all of the S&P 500's gains since the start of 2010 have come on the first trading day.
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Reader Comments (3)
I think a study needs to be done on how often a streak of up days on the first of the month can last. That's 7 in a row. Can't last forever, it's basic statistics.
Interestingly, if you go back a little further you'll notice the last time we saw 7 consecutive months of the 1st trading day being positive it was followed by 2 down months. Maybe not a surefire bet, but then again neither is betting on every 1st trading day of the month being up.
http://johnnystocks.blogspot.com/2011/02/first-day-of-month.html
I relate that the exhaustion of The Central Bank’s seigniorage came on February 22, 2011, as is seen in distressed securities, FAGIX, failing to rise higher, which decreased demand for stocks, ACWI.
With the failure of the US Central bank’s seigniorage, risk appetite has turned to risk avoidance and the bear market of all bear markets commenced on February 22, 2011. The rise in stocks on February 28, 2011 manifested as a short selling opportunity; as stocks are likely to rise on the morning of March 1, 2011, there is going to be yet another short selling opportunity. In a bear market one sells into strength, and in a bull market one buys into weakness.
The chart of the transportation shares, IYT, communicates they are damaged beyond repair and that they will not be available to help drive the market higher; and as a result the stock market will be turning lower. Confirmation comes from the three black crows in Genesee and Wyoming Railroad, GWR as well as the topping out in Air Transport Services Group, ATSG.
Inflation Destruction is now making its first appearance. Urban Dictionary relates Inflation Destruction is the fall in investment value that accompanies derisking and deleveraging out of investments that were formerly inflated by money flows to, and carry trade investing in, high interest paying financial institutions, profitable natural resource companies, and high growth companies.
Ben Bernanke’s quantitative easing has exhausted, as is seen in its seigniorage of distressed securities, FAGIX, turning lower. The failure of Quantitative Easing is seen in that a bear stock market commenced February 22, 2011 with a number of sectors such as Solar, KWT, leading the charge lower.
The currency leverage curve, that is the ratio of the small cap pure value shares, relative to the small cap pure growth shares, RZV:RZG, manifested a lollipop hanging man candlestick, signaling a currency will fall lower, or a number of currencies are going to fall lower. I have no crystal ball and cannot tell you if the US Dollar, $USD, will be one of these currencies. Only the currency traders know what they will sell next.