Trend: Over the last few months, the real money has been made in Monday rallies, in options expirations week, and in overnight trading.
Graham Summers identifies three trends that tell where the traders make their money. It's all based on timing the Fed actions. I might look at buying on Friday evenings prior to options expiration week.
The first, most obvious trend is the Manic Mondays trend. Dr. Robert McHugh as done extensive analysis on this trend, showing that for the 43 weeks ended Friday January 8, 2010, stocks have rallied on 30 out of the 43 Mondays.
Even more significantly, these Monday ramp jobs have contributed the bulk of the market rally’s gains since March 2009. McHugh comments that all told, 80% of the gains stocks have posted since March 2009 have come on Mondays.
The significance of this trend cannot be overstated. Someone (or several someones) has been pushing S&P 500 futures up virtually every weekend since this rally began. Since most Wall Street traders take their cues from the overnight futures market, this has resulted in massive gap ups on most Monday mornings.
By the way, the “Monday effect” works even when the market is closed on Monday as yesterday’s action attested. All you need is a weekend and light futures trading to produce a Manic Monday.
The second trend that has dominated this market since the March 2009 bottom is the Bernanke Options Expiration juicing. In simple terms Ben Bernanke has shown a REAL preference for pumping money into the financial system on the exact week when options are expiring. ...the LARGEST Fed moves have ALL occurred on expiration weeks.
Options expiration week historically is a time of GREAT market manipulation as Wall Street traders try to push their positions into the black so they can close them out at a profit. For the Fed to be making its biggest infusions of capital on ALL of these dates is “a bit odd” to say the least. The fact it has occurred like clockwork for months makes this trend almost as regular as the Manic Monday Ramp Job.
The final trend that has dominated this market is the Night Session Ramp Job. The simple fact is that from September 13, 2009 until year-end, ALL of the stock market’s gains occurred in the over-night futures session from 4:00 ET to 9:30 AM ET.
Tyler of ZeroHedge was the first to identify this trend.... the market basically traded sideways during the normal day session (9:30ET to 4PM ET). In contrast, the after hours futures market (4PM ET to 9:30AM ET) accounted for ALL stock gains.
So there you have it, the three most dominant trends of this market rally. None of them are pretty. None of them involve fundamentals. And ALL of them are directly related to the Fed’s liquidity pump.
via David Wilson