Is Abnormally Profitable Recent Performance On “Mutual Fund Mondays” Indicative Of Market Manipulation Or Just Herding?

Is Abnormally Profitable Recent Performance On “Mutual Fund Mondays” Indicative Of Market Manipulation Or Just Herding?

Courtesy of Tyler Durden

With Erik Hane

Zero Hedge has previously discussed the bifurcation in market performance when comparing regular hour trading with that of the afterhours session, noting that in the September through December 2009 period, the market would have been flat if one were to strip away the benefit of gains after the market closed. Today, we take a look at a different set of data, namely observing a very peculiar market phenomenon associated with the term coined as Mutual Fund Mondays, especially over the past 6 months. Whereas on a long-enough timeline, the market performance on any given Monday (or, more specifically on any given first day of the business week), has averaged to about a 50% win/loss ratio, this is certainly not the case in the September 2009 – March 2010 period. In fact, during this time period, when the broader market has risen by only 10%, the positive contribution from Mondays has been 20%, implying that on all other days of the week the market has, on average, lost 10% in the past 6 months. Furthermore, the win/loss ratio for the first trading day in the last 26 weeks has been 85%: a nearly 3 standard deviations from the norm outlier. Let’s dig in.

To analyze this particular data set, we have split up the SPY performance from the past 52 weeks, and have primarily focused on the market performance (as captured by the broad SPDR ETD) on first day of any particular week. We notice two distinct regimes: one from March 1 2009 through the end of August, and a much more aggressive one beginning in September 2009 and continuing through today.

First, below we present is a price/volume chart of the SPY performance in the two periods under consideration.

While market volume is not a topic in this particular discussion, the secular decline as the market has kept going higher has only been interrupted by the brief correction in early February when the market was forced to undergo a breif 10% correction, which forced volume to spike up substantially. Now volume is back to normal.

Yet what we would like to bring your attention to are the following to charts, which scatterplot the performance of any given first week day mapped over time.

First – the period from March through September 2009:

And next, the period beginning September 2009 and continuing through today:

Here are…

Read the original story at Phil’s Stock World