Why Tuesday is the new Friday for stock traders

4th June 2013 No Comments


dow jonesWhile larger trends are not exactly the kind of surefire indicators you can use to make specific trades and turn a profit, it still helps to understand the movements of the market as a whole when trading. Therefore, it is curious indeed that the Dow Jones industrial average has performed significantly better on Tuesday than on any other day of the week during the past twenty weeks.

CNN’s Ben Rooney explored the phenomenon in a recent article, pointing out that “the Dow Jones industrial average has posted gains every Tuesday for the past 20 weeks.” No day of the week has performed that well for that long since 1900, says Ryan Detrick of Schaeffer’s Investment Research. In fact, no day of the week has posted gains for longer than 13 consecutive weeks before.

Some explanations are being thrown around, of course. Some say it might be random, although this long of a trend seems to say otherwise.

I would go the other way, though, and say that investors have taken notice of the Tuesday gains, and are confident enough in them that they are investing on Tuesdays, which in turn makes the gains happen. A self-fulfilling prophecy, if you will. Rooney goes a bit further with that concept and notes that automated trading algorithms likely have noted the trend and started adjusting to them by making Tuesday purchases, as well.

Another fun theory is that since Monday has been an awful day during 2013, Tuesday is a natural reversal day of those Monday losses. Of course, Monday is down 600 points this year and Tuesday is up 1,518 points, so that wouldn’t explain it all.

A more savvy explanation could be that the Federal Reserve generally buys bonds on Tuesdays and Fridays, causing an upward trend on those days. Fridays are up 760 points this year, after all. Also, mutual funds often come from orders placed on weekends, and the funds often aren’t put into place until Tuesday.

Whatever the reason, if you’re in a buying mood, Tuesday is as good of a day as any to get it done.

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