Seasonal MACD Switching Strategy Update & Bullish Days of Week
By: Christopher Mistal
April 21, 2015
For nearly five decades the annual Stock Trader’s Almanac has studied and analyzed the importance of Mondays (or first trading day of the week) and Fridays (or the last trading day of the week). Friday is the day for squaring positions. Long exposure is trimmed and/or short positions are covered before traders take off for the weekend. This is done to reduce headline risk over the weekend. Mondays are significant because this is the day that weekend news and developments are digested along with any early Monday morning research and strategy comments. 

No matter how you slice it, Friday and Monday are important days. Last Friday, the market sold off in excess of 1% on concerns of Chinese growth and possible new market regulation there along with renewed worries about Greece. But, when these concerns failed to materialize over the weekend, the market rallied on Monday to gain better than 1%.

In the following charts the percentage of times DJIA, S&P 500 and NASDAQ have closed higher on each day of the week are presented. The baseline chart is of the S&P 500 using data from March 9, 2009 through the end of 2014. Year-to-date charts then follow.  Over the entire bull market’s life gains have been fairly equally spread over each day of the week. Over the course of the entire bull market, Thursday has been the most consistently positive day, posting a gain 58.1% of the time.

[S&P 500 Daily Performance Charts]
[DJIA Daily Performance Chart]
[NASDAQ Daily Performance Chart]

However in 2015, Monday (or the first trading day of the week) has been best for DJIA and S&P 500, positive 62.5% of the time. Friday (or last trading day of the week) has been 50/50 for DJIA and a net loser for S&P 500. As of yesterday’s close, only Monday and Thursday have winning records and currently account for all of the market’s meager gains this year. Presently the best strategy appears to be buying weakness on Fridays and Wednesdays ahead of solid gains on Mondays and Thursdays.  

MACD Update

As of the close yesterday, both the faster moving MACD “Buy” and slower moving MACD “Sell” indicators (at bottom of following charts) applied to DJIA and S&P 500 were positive. Damage done to the indicators on Friday was largely undone by Monday’s gains. Today’s down trading has moved the “Sell” indicator closer to triggering. A 0.3% DJIA decline and a 0.9% S&P 500 decline on Wednesday would turn respective MACD negative.

[DJIA Daily Bar Chart]
[S&P 500 Daily Bar Chart]

Continue to hold long positions associated with DJIA’s and S&P 500’s “Best Six Months.” We will continue to monitor the fundamental and technical outlook and issue our Seasonal MACD Sell signal when corresponding MACD Sell indicators applied to DJIA and S&P 500 both crossover to sell.