Enough Already with the Mondays

21Jan10

There’s been a lot of chatter lately re: Monday’s strength over the last four months. The analytically challenged are usually drawn in by stats like the following…

Since September, 14 of the last 16 Mondays have been positive on the S&P 500 for an average gain of 0.83%.Wowzahs, I’m going long and strong on Monday!

But how uncommon is this string of up days really?

16 Mondays is about 75 trading days.

In the graph above I’ve taken every 75-day period for the S&P 500 since 2000 and looked at the excess median return of the best day of the week over that period (whatever day of the week that happened to be), versus all days of the week.

Our most recent run is of course on the far right of the graph, and as the graph makes clear, is nowhere near levels seen at other points this decade.

But perhaps the effect doesn’t bear out in big days, just in up days, so next I’ve run the same test, but looked at the percentage of positive days in each 75-day period compared with all days:

Same story.

Will the “Monday phenomenon” continue? I don’t know. Will my next coin flip fall on heads?

There’s no way of knowing. But what I do think we can say is that this observation is far from unprecedented and, if history is our guide, past its expiration date.

Happy Trading,
ms

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