By now we all know about “up on Monday, down on Tuesday”, but do we really know it’s still true? Taking advantage of this means you have to enter the previous day’s close. However, when I enter a trade is usually at the open, so I also want to know what day the market is likely to go up from the open to the close.
I was reminded of this from an article in Technical Analysis of Stocks and Commodities (November 2023), by Huck and Huck. It did not address how I would enter the market. Because I always like to verify what I read, I did the daily returns in two ways:
- Cumulative returns of each day of the week based on the entry at the previous close. Every return is then close(n)/close(n-1) – 1.
- Cumulative daily returns based on opening entry and closing exit. Any return is then close/open – 1.
S&P 500 ETF (SPY)
Let’s look first at the SPY, roughly close in Figure 1. As we’d expect, all show some gain given that the S&P is higher now than it was in 2000. However, contrary to the old saying, Tuesday looks be the best day for profits. Friday is the worst, and the other days are pretty much the same.
Figure 1. SPYU by day, close-up.
As I said before, the close results do not help me because I go into the opening. Figure 2 summarizes those values. As you can see, there is a big difference. Wednesday and Thursday are the most consistent winners and Friday is the clear loser. Friday’s opening entry is unlikely to end in a profit.
Figure 2. SPY by day, open-to-close.
While index markets tend to be correlated, QQQ has had some big winners, especially in the last two years. Figure 3 shows the close-up models. Again, Friday is the weakest, but has been consistent since 2010. Tuesday, Wednesday and Thursday are all good.
Figure 3. QQQ by day, close-up.
When we look at the open to close for QQQ, we see that Wednesday and Thursday gave some gains, Monday recently and Friday is again the worst time to place a position. We can speculate and say that traders ease up before the weekend, but we don’t know for sure.
Figure 4. QQQ by day, open to close.
Nvidia, Google and Amazon
So far, Wednesday and Thursday seem to be the best days to enter. But that’s if you’re buying the index. How different are the most popular stocks? They do not have the advantage of diversification and may be run by a few traders and large funds. Figure 5 shows the close-by results of NVDA.
Figure 5. NVDA by day, close-up.
Not only does the NVDA gain almost every day, perhaps less on Friday, but the best days are Tuesday, Wednesday and Thursday, generally in line with the index markets. However, Figure 6 shows a different picture. While Wednesday and Thursday show the best returns, they are relatively small. Tuesday has been good for a while, but Friday is particularly bad and Monday has been very volatile.
Figure 6. NVDA by day, open to close.
Is Google the same? Figure 7 shows that Tuesday is the best, with Wednesday a close second. Again we see Friday as the worst day to generate a profit.
Figure 7. GOOGL by day, close up.
Again, using the open to close, we see Tuesday as the best and Friday as the worst, shown in Figure 8.
Figure 8. GOOGL by day, open to close.
Finally, we’ll look at Amazon (AMZN). Maybe the traders of my three stocks are all the same, or the market has a new rule, “up on Tuesday, down on Friday”. Figure 9 shows steady gains, but more on Tuesday and less on Friday.
Figure 9. AMZN by day, close-up.
The closing step shows that long-term profits allow most days to generate a profit, except perhaps Friday. Amazon’s returns in Figure 10 are mostly early, but there is still consistency with other stocks.
Figure 10. AMZN by day, open to close.
Is there consistency?
I admit this is a small sample, but those are markets that many of us trade. There is also consistency. Monday is no longer the “rise” day, with traders resetting their positions or taking new positions in the open. There is no harm in entering on Monday because most returns are neutral.
But Tuesday and Wednesday seem to be the best, Thursday is good too. What is more consistent is that Friday is more likely to produce a loss, whether entering Thursday’s close or Friday’s open. We can speculate and say that traders taking early profits and going out for the weekend, or that government reports on Friday (especially the monthly jobs report), tend to upset the market.
Remember that Friday is not always a loss and Tuesday and Wednesday are not always profits, but these charts show that trading on those days has a predictable long-term pattern.