Jun

20

There is a doubting Thomas in everyone's heart, since no one ever has taken any trades without some risk. It is this risk that always creates doubts in all minds. In day to day flow of the markets the doubts do not get much chance to surface up. But whenever there is an unusual holiday gap, i.e. a longer than normal weekend, a significantly large enough number of minds get the chance to live up to their subdued doubts. Irrespective of whether one is long or one is short, the extra holiday provides the opportunity for one to think enough to choose to act differently than one had been. So long holiday gaps tend to create reversals. Someone might choose to test this. Perhaps a good way to do this might be to create filters such as If prior 5 day returns before a long weekend were <0, then 5 day returns after the long weekend are >0 or vice versa.

Vic responds:

Sushil Kedia elicits an ingenious theory that before holidays humans tend to change their minds. I tested the theory as it mite be highly relevant today. fortunately the multivariate thing i discovered and used for forty years is perfect for testing the theory.

From 2011 to current there were 43 occasions when S&P was up big in 10 days before holiday, and on average 20 days later the market was down 6 points. there were 21 occasions where S&P was down big in 10 days before holiday. after big down, the average 10 days later was up 2% and up 3% 20 days later, with probabilities of 80%.

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