This is a 3:50 intraday update of Turov on Timing for Tuesday, May 31, 2011.
The market gap opened about 1% higher this morning after European markets rallied sharply following a report in The Wall Street Journal that Germany may abandon a push for an early rescheduling of Greek debt, which could pave the way for a new aid package for the country. [Editorial comment: See the lead story in today’s BARRON’S as to why that’s probably not such a smart thing for Germany to do.]
In my overnight message to you, I said, “the odds are that if (overnight) gains hold, it will be the high of the day. Accordingly, TOT daily traders went 200% short at SPX 1343.27 (just a tad under the high of the day) at 9:40 a.m. After giving back half of the upside gap, in late trading, the SPX is currently about the same level as where we went short.
While the first trading day of the month has a stronger probability of advancing than any other day of the month, the most recent first trading sessions of June have been quite mixed: 2008 was down 14.71 SPX points, 2009 was up 23.73, and 2010 was down 18.70. Net up? No. Volatile? Absolutely.
Furthermore, when the day following Memorial Day has been up (such as today), the record for the following trading day has been mixed, with the most recent occasion, 2009, down a whopping 17.27 points.
In addition, as it has become widely known that the first day of the month is typically strong, it is possible that the last day of the month is getting stronger in anticipation – much as seasonality strength has “moved forward” compared to where most strength was years ago.
So, overall, going blindly long because of tomorrow’s being the first trading day of the month is probably not such a good idea.
Furthermore, my NASDAQ model for tomorrow morning is decidedly bearish. So, all things considered, I’m more comfortable being short than long, and my recommendation is to hold our short position overnight and into tomorrow.
Thanks for the opportunity to be of service, and I’ll email you again in about 6-7 hours.
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