Is There A Better Day To Enter The Market? (NYSEARCA:SPY)

By now we all know about “up on Monday, down on Tuesday,” but do we really know that it’s still true? Taking advantage of that means that you need to enter on the close of the previous day. However, when I enter a trade it’s usually on the open, so I also want to know on which day the market is likely to rally from the open to the close.

I was reminded of this by an article in Technical Analysis of Stocks & Commodities (November 2023), by Huck and Huck. It didn’t address the way I would enter the market. Because I always like to verify what I read, I did the daily returns in two ways:

1. Cumulating the returns of each day of the week based on entering on the previous close. Each return is then close(n)/close(n-1) – 1.
2. Cumulating the returns of each day based on entering on the open and exiting on the close. Each return is then close(n)/open(n) – 1.

Simple enough. We’ll look at the results from 2000 for the S&P ETF (SPY), the Nasdaq ETF (QQQ), and three markets that I thought would be interesting, Nvidia (NVDA), Google (GOOGL), and Amazon (AMZN).

S&P 500 ETF (SPY)

Let’s first look at SPY, close-to-close in Figure 1. As we would expect, all show some profit given that the S&P is higher now than in 2000. However, unlike the old saying, Tuesday seems to be the best day for profits. Friday is the worst, and the other days are more or less the same.

Figure 1. SPY by day, close-to-close.

As I said before, the close-to-close results don’t help me because I enter on the open. Figure 2 accumulates those values. As you can see, there is a big difference. Wednesday and Thursday are the steadiest winners and Friday is the clear loser. Entering on the Friday’s open is not likely to end with a profit.

Figure 2. SPY by day, open-to-close.

NASDAQ (QQQ)

While the index markets tend to be correlated, QQQ has had a few big winners driving it, especially in the past two years. Figure 3 shows the close-to-close patterns. Again, Friday is the weakest, but has been holding steady since 2010. Tuesday, Wednesday, and Thursday are all good.

Figure 3. QQQ by day, close-to-close.

When we look at the open-to-close for QQQ, we see that Wednesday and Thursday gave some gains, Monday more recently, and Friday is again the worst time to set a position. We could speculate and say that traders lighten up ahead of the weekend, but we don’t know for sure.

Figure 4. QQQ by day, open-to-close.

Nvidia, Google, and Amazon

So far, Wednesday and Thursday seem the best days to enter. But that’s if you are buying the index. How different are the more popular stocks? They don’t have the advantage of diversification and may be driven by a few large traders and funds. Figure 5 shows the close-to-close results of NVDA.

Figure 5. NVDA by day, close-to-close.

Not only does NVDA gain nearly every day, perhaps less on Friday, but the best days are Tuesday, Wednesday, and Thursday, generally consistent with the index markets. However, Figure 6 shows a different picture. While Wednesday and Thursday show the best returns, they are relatively small. Tuesday has been good for a while, but Friday is especially bad and Monday has been very volatile.

Figure 6. NVDA by day, open-to-close.

Is Google the same? Figure 7 shows that Tuesday is the best, with Wednesday a close second. Again we see Friday as the worst day to generate a profit.

Figure 7. GOOGL by day, close-to-close.

Again, using open-to-close, we see Tuesday as the best and Friday the worst, shown in Figure 8.

Figure 8. GOOGL by day, open-to-close.

Finally, we’ll look at Amazon (AMZN). Perhaps the traders of my three stocks are all the same, or the market has a new rule, “up on Tuesday, down on Friday.” Figure 9 shows steady gains but more on Tuesday and less on Friday.

Figure 9. AMZN by day, close-to-close.

The open-to-close shows that long-term profits allow most days to generate a profit, perhaps except Friday. Amazon returns in Figure 10 are mainly early on, but there is still consistency with other stocks.

Figure 10. AMZN by day, open-to-close.

Is There Consistency?

I admit this is a small sample, but they are markets that many of us trade. There is also consistency. Monday is no longer the “up” day, with traders resetting their positions or taking new positions on the open. There is no harm entering on Monday because most returns are neutral.

But Tuesday and Wednesday seem to be the best, even Thursday is good. What is most consistent is that Friday is most likely to produce a loss, whether entering on Thursday on the close, or Friday on the open. We could speculate and say that traders take early profits and exit for the weekend, or that the government reports on Friday (especially the monthly jobs report), tend to upset the market.

Remember that Friday is not always a lose and the Tuesday and Wednesday are not always profits, but these charts show that trading on those days have a predictable long-term pattern.