Monday, Monday

Tuesday, February 02, 2010

Yes, Macro Man knows that it isn't Monday. But many risk assets are performing like your average commuter feels on a typical Monday morning...tired, uninspired, and wishing it were the weekend.

OK, AUD has the excuse that the RBA failed to hike rates last night, though the statement probably couldn't have been more hawkish if they had....

...but what's the excuse of "Dr. Copper", which has been taken to the smelter once again? It presents an interesting contrast with recent solid PMI readings.
And the KOSPI, which Macro Man's been following closely for several months now, made a new closing low for the year. What gives?
Macro Man isn't sure.....though perhaps the anomaly is not Tuesday's price action, but Monday's. It's by now pretty well known that since the start of Q4, Monday has been something of a red-letter day (or should that be green-letter day?) for the SPX, as it's notched up 15 "wins" against just 2 "defeats", with an average daily return of 72 bps. Not bad shootin', eh, Tex?

By way of comparison, over the same time period, the other 4 days have notched up an average daily return of -11 bps; ah, there's the bear market we've been waiting for! How unusual is this? Macro Man decided to do some digging. Using daily SPX returns since 1928, he compared Monday's average return with that of the other 4 days over a few time periods.

Interestingly, since the start of the time series, Monday's performance has been notably worse than the rest of the week; despite the sharp nominal rise in the SPX over that time period, Monday's average return has actually been negative!

Since the start of the crisis, meanwhile (defined as August 2007), most of the SPX's losses have come on Mondays....the return from Tuesday - Friday has averaged just -1bp per day.
So perhaps this little "Monday effect" that we've observed is just a statistical quirk, representing "payback" for the unusually poor performance of Tuesday-Friday over the last 18 weeks or so? Maybe, maybe not.

Macro Man looked at rolling 18 week windows (i.e., the time period of recent Monday outperformance) since the start of his time series, comparing Monday's relative performance with those of the other 4 days. Let's just say that if Monday's recent outperformance were a school kid, it would get bundled straight into the "gifted and talented" group, as it's in the 99+% percentile of performance. The same holds true if we expand the dataset to look at relative performance of every day versus the other four in 18 week windows. The current bit of Monday outperformance is in the 99th percentile.
Now maybe it really is just chance...or maybe the tin foil hat crew are onto something Perhaps we'll never know, at least until the current crop of Federales get hauled before another Congressional committee.

Anyhow, Macro Man's advice is to enjoy Monday's while you can...reality will no doubt start to bite sooner rather than later. For the chap in the background of the video clip below, Macro Man somehow thinks it might be sooner....

Posted by Macro Man at 8:48 AM  


Nobody could be that stupid - methinks there was a bet on the desk behind that move.

Nemo Incognito said...
9:14 AM  

What, no mention of the only reason to smile for AUD longs today?


Anonymous said...
9:26 AM  

Sorry MM,

scrap that - multi media player didn't load in my browswer thus didn't see you had posted it.


Anonymous said...
9:41 AM  

agree with Nemo - must have been a set up - still funny though...

Anonymous said...
10:15 AM  

I have a few friends at DB who used to put together a pool for putting really strange words into the market commentary. My memory may fail me but squamous, inveterate, ninja and such were a few. For some reason that doesn't get you fired in Australia.

Nemo Incognito said...
10:22 AM  

Nemo, back when I was a researcher, sneaking 'challenge' words into comemntary was S.O.P.

Macro Man said...
10:40 AM  

MM, we live in a vastly more douchey and stitched up world these days....

Yvonne said...
11:10 AM  

Nice counting MM!
If you are right about the Monday effects long term then that really
flies in the face of assertions in Niederhoffer's mailing list and website. A typically sardonic post:

As to the tin foil hat crowd they are probably on to something this time.

The reaction of the trader in the video is not consistent with the "on a bet" hypothesis.

mc said...
11:13 AM  

"Nobody could be that stupid" - has Nemo never been on a trading floor?

Anonymous said...
11:15 AM  

Ok fair enough. But he didn't look like an intern which means he should have known better or knows he isn't going to hang for it.

Stupidest thing was seeing a sales trader bet that if Greece won the 2004 UEFA Euro Cup he would shave his head. Literally got ambushed, duct taped to the chair and shaved shortly after HK market close for lunch. Funny stuff.

Nemo Incognito said...
11:23 AM  

Happy Groundhog's Day, MM--hope it doesn't turn out like the movie. . .

But What do I Know? said...
12:24 PM  

MM, I really wish they would stop pointing those TV cameras over my shoulder while I'm working.

Definitely something to the Money Monday theory, often commented on by frustrated Bears lately.

LB went for a punt on the long side late Friday and had a good day yesterday. Very low volume, again..

leftback said...
12:45 PM  

I prefer Fridays to Mondays - but for different reasons...

Anonymous said...
12:50 PM  

re monday.. have you seen a chart from zero hedge or someone like that on seeking alpha, it pointed out a similarly interesting observation on 'session' and 'overnight' returns in the US indices. in the 09 rally, the mkt seemed to go up mostly when everybody was at home..

and while we r at it, here is my version of what the tea leaves say;
the few bears left after the recent rally of 2009, they all got tempted into closing shorts in the last few days. hoping to reopen it a bit higher. along with those who werent short, hoping for the same thing. so what now ? most likely that would be just too easy, so we drop more another 5% or so, before there is a tradable bounce in spoos

spagetti said...
1:34 PM  

My original intention was to pull down my stats book and figure out what the ex ante probability is of such monday outperformance by chance....we know the emprical distribution, but thought it would be interesting to do a statistical analysis. Sadly, I ran out of time this morning.

Anyone who wants to do it should feel free!

Macro Man said...
1:48 PM  

I've been following copper inventories and they've been rising very steadily since July 1st:

(and supposedly there are Chinese stocks even larger, official and unofficial.)

It seems the price kept rising on the assumption that the demand that would soak up the inventory was just around the corner. But now PMIs have been positive for several months and the inventories just keep rising...

Bob_in_MA said...
1:50 PM  

Now I know why I call it "Turnaround Tuesday"
Thanks MM

Nic said...
3:04 PM  

It's like a grasshopper jumping all over the place.

Nik the Baracuda said...
5:51 PM  

I reckon someone sent him an email with the pics. It looks as if he's opening attachments to an email. I think whoever sent the email is in far deeper shit than the guy exposed in the clip.

JB123 said...
5:57 PM  

On this Monday thing, it's amazing it still works. There was a research boutique out there pointing it out a few weeks ago.

Since Mondays have also been negative it suggests that people do their thinking in their PJs over the weekend and place their bets on Monday.

Not sure why it wouldn't have been like that in times past, possibly the HFT guys who are now supposedly 70% of the market?

Steve said...
8:05 PM  

Maybe because in 08 and 09, Fed or Treasury always made some emergent decisions over weekend, such as summon top bankers to D.C. to meet...then there was new bail out every weekend. So on Mondays you saw the big rallies.

zjin said...
8:46 PM  

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