Tuesday, January 13, 2009

Turnaround Tuesdays

Many traders have heard the term “Turnaround Tuesday”. And with the market a bit short-term oversold after the selloff the last few days many traders are also hoping we see a Turnaround Tuesday. But are they just a myth? I recently put them to the test.

First I looked at performance if the market closed lower 1 day. In the table below I show all the days of the week. The day listed is the trigger day – not the performance day. In other words, if Monday was the 1st down day then the S&P would be bought at the close and sold at Tuesday’s close. So the Monday trigger tracks Tuesday’s performance. Tuesday’s trigger tracks Wednesday’s performance…and so on.

Here we see going back to 1960 that Tuesday had the only positive results of the week.

What if the market was down 2 days (as it is now) instead of just one?

Tuesday is again positive, but in this case Thursday has actually performed a little better.

How about 3 days in a row?

Here again Tuesday is the star of the week.

But these tests all went back to 1960. What if we instead just look at more recent times? Below I show results for just this decade:

In all cases Tuesday shows by far the best potential for a turnaround. The results are even better recently than if you look back 58 years. It appears Turnaround Tuesdays are real…and they’re not just for old folks.


Anonymous said...

nice work.

Larry Williams also tweaked this a bit and said its even more reliable if the S$P is down on monday, treasuries rally on monday, to then buy and sell the tuesday close. i believe using a 2% stop.

ive traded this pretty successfully in the past. made the trade today, looks as though it wont work as i write this. but overall performance has been nice.more wins than losses, bigger wins than losses. thats what i like to see.

Unknown said...

Thanks for this study. I remember I emailed you several months ago hoping you could test the "T-Day Theory" and this test is along those lines. I'd be interested to see if these results are exclusive to a lower closing market or if they're similar regardless of previous action.