Wednesday, June 30, 2010

What Should We Expect for Day 1 of the Quarter?

After failing to produce the traditional end of quarter 'mark up' (remember it does not happen on the last day of the quarter but generally in the 2-4 days before the closing session), what can we expect on day 1 of the new quarter?  Generally of late we've seen a nice gain with talk of "mutual fund inflows" and other such nonsense, even as equity funds have seen withdrawels the past 2 years.  Let's look at how day 1 of the quarter has performed since the market bottom of March 2009, with the caveat we have massive headline risk coming in the next 2 days as I believe China Purchasing Managers (which actually has moved markets a lot lately) is released overnight, ISM Manufacturing tomorrow morning, and the employment data Friday.  Will investors be taking Clint Eastwood's "Are you feeling lucky punk?" to heart, or still play their reindeer games?

Using the S&P 500....

Apr 1, 2009: +1.70%
Jul 1, 2009: +0.90%
Oct 1, 2009: -2.60%
Jan 1, 2010: +1.60%*
Apr 1, 2010: +0.74%

Average gain: +1.24%
Average loss: -2.60%
Average: +0.47%

*obviously not only the 1st day of the quarter, but 1st of the year

Hence, using this most simplistic of analysis, with a limited data set of 5 days during this move off March 2009 lows, we should expect tomorrow to be up (80% chance hah).  But the one time people anticipated the move they got squashed.  What would Clint do?

[If you are curious, Jan 1, 2009 was +3.2%]

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