One of the most written about market effects is the historical tendency for the first trading day of the month to be the most bullish day of the month. I have always been skeptical about naively following such strategies, and for a simple reason: The more people are aware of such factors, the greater the likelihood that traders attempting to profit from the strategy will ultimately shift the odds such that it is no longer profitable, similar to what happens under any type of Parimutuel betting scheme. The same thing occurs in markets.
In spite of the above consideration, I have found it a useful concept, particularly when used in conjunction with other trading factors/ideas. For example: The short-term stock index timing model that I use (which factors in first trading day of the month along with other factors) had a forecasted negative expected value of over 6 points for today’s day session in the ES contract, which is huge.
I admit though, it is much more fun to write about something after it has already yielded a substantial profit for the day – I guess that is my ego talking (or writing). I am not immune to such things
An update for those who have followed along with this blog - I am not sure that I will be writing more in the way of free strategy articles. I am at the point with the articles where my attempts to write about “new stuff” is starting to breach on ideas that I feel are proprietary and too valuable write casually about (I started a number of articles over the past few months that I never completed for just this reason). The world is to competitive for such things to make sense. stay informed by joining my email list here.