Stock Trading Basics
Down Friday/Down Monday Warning
By Frank Kneipher
Apr 11, 2007 - 6:08:47 AM

Down Friday/ Down Monday Warning

For most market professionals, Fridays and Mondays are the most important days of the week.   Friday is the day for squaring positions – trimming longs or covering shorts before taking off for the weekend.   Pros want to limit their exposure (particularly to stocks that are not acting well) since there could be unfavorable developments before trading resumes two or more days later.

Monday is important because the market then has the chance to reflect and weekend news, plus what traders might think after taking in the previous weeks action along with plenty of Monday morning research and strategy comments.

If you been have watching the Friday-Monday market performance for the past 25-30 years you will see that a down Friday followed by a down Monday is often an important market variation point that exhibits a negative bias and frequently coincides with market tops and on a few climatic occasions, such as in October 2002, near market bottoms.

It could be as simple as looking at the performance of the DOW on Friday and the following Monday to get a quick reading on which way the market may be heading.   Between 1995 and June 2006 there have been 118 occurrences of a down Friday followed by a down Monday with 31 falling in the bear market years of 2001 and 2002 producing an average decline of 12.7%

It might be a good idea to create a chart indicating where these events have occurred.   This can not only give you an idea as to what has happened in the past but more importantly it can be a useful warning toward future market conditions.

The illustration above is just another component for us to look at.   It is based on historic data and certainly NOT an indicator on the future, but we should be aware of what it can tell us.   It puts things in perspective and allows us to look at a bigger picture.   There is a wealth of information in these figures and perhaps one little observation will trigger your mind and point you in the right direction.   Maybe some of this will tie in with your own objective.  

The ideas shared in the MENTORINGSTOCKTRADERS.COM mentoring program will certainly teach you how to be in the right position to capitalize on these, and other market conditions.