| Expiration Friday has had a decidedly negative tone over the past couple of years, and has given a negative average return over the past seven years (albeit with a slightly greater than average number of days ending up on the day - meaning that we've had some nasty declines on these days). I took a look at instances where the week leading up to expiration day was negative, wondering if that would reverse the negative implications of the day. Turns out it doesn't. In fact, over the past seven years, when the week leading up to expiration Friday is down, then that Friday shows an average return of minus 0.55%, with a probability of being positive of only 36%. In contrast, when the week leading up to expiration day is positive, then expiration Friday shows an average return of plus 0.08%, with a probability of being positive of 66%. When the week leading up to expiration is strongly negative (I considered strongly negative to be down more than 3%), then expiration Friday showed an average return of minus 1.34%, with a probability of being positive of 29%. So we can see that the odds of tomorrow being up are small, while the odds of it being down (and down considerably) are fairly large. Of course, this information is being considered in a vacuum, and doesn't take into account the other sentiment measures we have today. If we wanted to truly compare apples-to-apples, we would be left with a sample size much too small from which to derive any conclusions. |
