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The Chairman
Victor Niederhoffer



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Opening Moves

Today's post on counting is inspired by the large number of board game players who have recently been attracted to our site, known by their revealed preferences for the Wiswell proverbs, the Nigel Davies proverbs and the Collab's persona, as well as the many anomalous moves that have occurred this week. What better thing to do than to get out a manuscript book, start with the openings that usually lead to victories, pay particular attention to the opponents' play when the old faithful opening led to losses, and improve the game for the future?

The landing that is probably best known to players of the market game is that there are times when inflows and outflows of liquidity hit the market, like around the horrible April 15, and the beautiful times that we get paid and can deposit any overplus in our index funds and growth funds, and buy tried and true favorites like Western Union, Brunswick and good old General Motors and IBM. One aspect of the inflows is that the first day of the month is well known to be bullish. Indeed, such facts as that the entire gain in the market in the last 10 years came from holding on the first day of the month, and that the average gain is some 0.3 % on such days, are so well advertised and well known to all market practitioners as to be useless. Our lamented cordial and politically correct  seasonalist used to love to tell us how he loved to make money hypothetically since he never trades his own account by paper trading such seasonals. And of course the more he loved it, and the more it was published, the less likely it was to occur.

You see, market people don't like to give money away, just as checkers players don't like to lose to old 14 or the Glasgow (or any of the other openings named after the cold British Isles where checkers used to be the only winter entertainment ).Thus, they telescope -- yes, they buy the days before, the same way the good board player never falls into a published trap. And indeed, in the week ending Sept. 30, the market anticipated the opening day gambit very well, going up seven days in a row from 1216 on Sept. 21 to 1234 on Sept. 30. All that, as we know, was taken back in one day, Tuesday, Oct. 4, when the market dropped 15 points from 1232 to 1217. And that was just the beginning, as we all know all too well, the same way a board game player knows never to use the same game against a good opponent he beat with it the last time out.

Of course, even the pure seasonalist of any note knows not to blindly play old faithfuls. (Wiswell always led with a move from his single corner to the middle of the board (c3 to d4). You see, certain first days of the month are quite different from others. Among them are those terrible first days of the month that start on Monday (or Tuesday, if Monday is a holiday). Since the turn of the century, there have been 33 such terrible Mondays. And you surely could have lost a nice 10% or 0.3 % a day by holding on such Mondays. And what happened after such Mondays as Oct. 3, 2005, when the market dropped 2.5 points? We count 10 such Mondays where the market declined that day and the subsequent four days to the end of the week, including the Sept. 4, 2001, Monday, where the market fell 4 points, then fell another 50 over the next four days before declining 60 points when the exchanges finally reopened in New York. We'll drop that one since it was obviously well known to the operatives who traded off of it.

Counting further, we note some more dates like the recent one as follows:

           date      move that   move rest of     move next
                       day         week             week
     	  01 03 03    -18          -06               17
          02 04 01    -19          -10               52
          9 04 01                 skipped
          04 01 02     -5          -19              -13
          06 03 02    -39          -10              -20
          12 05 02     -0.5        -21              -27
          03 03 03     -5          - 7                6
          07 02 04    -14          -13              -10
          01 03 05     -7          -20              - 3
          10 03 05     -2          -35

A mixed bag at best.

*Thanks to Alan Millhone, president of the American Checker Federation, for inspiring this post.

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