I have a few hunches about the stock market at a macro level that I have decided to review and share. The questions, hypotheses, and findings are below.
Table of Contents
What is the Perfect Day to Buy/Sell?
The more I learn about the stock market, the more questions I have. One question that has been at the forefront of my brain is in regards to the day of the week. Is Monday a good day to buy with an exciting week ahead? Is Friday a good day to sell with unknowns over the weekend?
Hypothesis
How I have felt and what I would expect is that Fridays are a good day to sell because the weekend can bring increased risk due to news during untradable periods. Because of that, I would expect that Mondays are a good day to buy after the Friday sell off assuming no negative news came over the weekend.
Results
Utilizing R Studio, I reviewed the average daily % gain/loss for a basket of 10 tickers across 2 years:
From here we can see that my hypothesis was wrong in both senses. Fridays are primarily days of gain, rather than my anticipated sell off. Similarly, Mondays are generally days of gain, meaning that they may not be the best time to enter, as it seems Tuesdays and Wednesdays are unpredictable. It is important to note that this basket, time range, and evaluation method are prone to error and this is not financial advice – merely my observation.
Exploring Further
To further investigate this, I back-tested one year (2/1/24-2/1/25) of data across 5 stocks. Here are the results:
HD
HOLD – ~1.14x investment
Buy T/W & Sell TH/F/M – 2.084x investment – 72% profitable
Buy TH/F/M & Sell T/W – 0.641x investment – 46.88% profitable
CAT
HOLD – ~1.18x investment
Buy T/W & Sell TH/F/M – 1.250x investment – 64% profitable
Buy TH/F/M & Sell T/W – 0.895x investment – 45.71% profitable
WMT
HOLD – ~1.89x investment
Buy T/W & Sell TH/F/M – 3.051x investment – 61.22% profitable
Buy TH/F/M & Sell T/W – 3.701x investment – 68.42% profitable
INTC
HOLD – ~0.55x investment
Buy T/W & Sell TH/F/M – 1.353x investment – 62.75% profitable
Buy TH/F/M & Sell T/W – 0.625x investment – 34.88% profitable
AMZn
HOLD – ~1.10x investment
Buy T/W & Sell TH/F/M – 1.204x investment – 59.57% profitable
Buy TH/F/M & Sell T/W – 1.551x investment – 56.10% profitable
Does the End of the Year’s Tax Situation Cause Stock Market Selloffs?
I have overthought taxes plenty of times, and this may be another. December is a time for holidays and purchasing, but also a time to close out the tax year.
Hypothesis
Light pockets after gift purchases paired with folks selling off stocks so losses hit their current year taxes may cause a dip in the market around the last 1-2 weeks of the year.
Results
Utilizing R Studio, I reviewed the average % gain/loss across the last two weeks of the year for the past 10 years and amongst a basket of 10 stocks.
Once again, it seems that I am incorrect… at least partially. I expected that nearly every year there would be a subset of folks who had losses and were looking to take immediate advantage of the tax implications. After looking at this, however, it seems that this does not seem to be the case for the majority of stocks across the years. The interesting note though, is that 2022 is really the only year with a major decline (SPX Dropping ~20%). In this specific year, there WAS a major price drop (and therefore potential selloff) right before the year’s end. This could also be due to the negative state of the market at this point though.
Just for Fun, What About Month Variations?
Interesting?
I’m hoping to utilize some of these findings in the Pstock Bot. You can check this page out to learn more or look here for other information on the stock market!
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