"Trade the first day, and stay away” is an investment adage from Jonathan Cheng in the March 1, 2011 Wall Street Journal. The rhyme is similar to the famous Wall Street adage, “Sell in May and go away.” It had been noticed by many Wall Street observers in 2010 and 2011 that the stock market experienced gains on the first trading day of every month. The adage has also been called “the first day of the month rally” or “the first day of the month rule.”
On March 1, 2011, however, stocks went down, proving that the adage doesn’t always hold true.
Wall Street Journal
MARCH 1, 2011
Much of Month’s Move Is on First Day
Today Will Test if Recent Trend Holds Up; Traders Have Been Taking Advantage of Substantial Rise.
By JONATHAN CHENG
It is the latest twist on an old adage: Trade the first day, and stay away.
Some traders have been adopting a new ritual in recent months—buying early on the first day of the month and selling by the day’s close—taking advantage of a peculiar phenomenon that has seen the Dow Jones Industrial Average rise substantially on the first day of each month. That one-day move often has accounted for much of the Dow’s gains for the entire month.
The Big Picture
“Trade the First Day, then Stay Away”
By Barry Ritholtz - March 1st, 2011, 6:46AM
This morning, the WSJ reports on a new trading pattern: First day of the month rally:
The article points to a likely source of the rally: Manufacturing data. It typically is released on the first day of the month. And, given the weak US Peso, “The manufacturing sector has been one consistent source of positive surprises during the economic recovery.”
The Magic Number for the Bulls
The bulls must move against the resistance at S&P 1,325
Mar. 2, 2011, 3:30 am EST | By Sam Collins, Chief Technical Analyst, InvestorPlace
Yesterday marked the first time in seven months that the first day of the month closed lower. From the very start of Fed Chairman Ben Bernanke’s testimony, coupled with an intraday high for oil selling at over $100 per barrel, it was clear that it would be a rough day on Wall Street. But the real focus was on the Middle East as the Saudi Arabia stock market plunged 7% amid rumors of Saudi tanks being sent to Bahrain.
Art Cashin On The Saudi Connection To Tuesday’s Big Market Plunge
Joe Weisenthal | Mar. 2, 2011, 9:12 AM
In his daily note, floor guy Art Cashin writes about yesterday’s selloff, which smacked traders who tried to play the “first day of the month” rule.
New York City • Banking/Finance/Insurance • (0) Comments • Saturday, March 05, 2011 • Permalink