Known and Unknown Anomalies

Readers are undoubtedly aware of one or another stock market anomaly, such as e.g. the frequently observed weakness in stock markets in the summer months, which the well-known saying “sell in May and go away” refers to. Apart from such widely known anomalies, there are many others though, which most investors have never heard of. These anomalies can be particularly interesting and profitable for investors – and there are several in the precious metals sector as well.  Today I am going to introduce one of those to you.

 

As Donald Rumsfeld, former secretary of defense knew, there are things we know we know, things we know we don’t know, and things we don’t know we don’t know (unfortunately he neglected to consider that there are also things we think we know that just ain’t so, such as “Saddam has WMDs” – but let’s not digress). Anyway, Seasonax knows them all! [PT]

 

Gold investors dead asleep for days?

To this end we are going to examine the performance of gold and gold stocks broken down by days of the week.

The first chart shows the annualized performance of the gold price in USD terms since 2000 (black bar), as well as the annualized gain generated on individual days of the week (blue bars).

I have measured the returns based on closing prices, thus the performance achieved on Tuesday equals the average percentage change between the close of trading on Monday and the close on Tuesday.

 

Gold, performance by days of the week, 2000 to 2017.  Friday stands out markedly

 

As the chart illustrates, one day really stands out: Friday. With an annualized return of 7.50 percent it reflects almost the entire annualized gain of 8.84 percent generated by the gold price over the time period under review.

By contrast, almost nothing noteworthy happened in the gold market from Monday to Tuesday. On Tuesday prices even declined slightly on average.

The difference – which has been measured over a period of no less than 4,585 trading days – is obviously quite significant. This suggests that these patterns are not a coincidence.

Gold investors indeed appear to be mired in deep sleep from Monday to Tuesday, or at the very least they are showing very little enthusiasm on these days.

 

The days of the week under the magnifying glass

What exactly was the cumulative trend in this pattern over time? The next illustration shows the indexed performance of gold since the turn of the millennium in gold color, as well as that of individual days of the week in other colors.

 

Gold, cumulative performance by days of the week, 2000 to 2017, indexed.
A steady uptrend was in evidence on Fridays – click to enlarge.

 

As the chart shows, prices essentially tended to move sideways over the first four days of the week. Only in 2009 did Wednesday (green line) manage to generate a somewhat stronger average return as well.

The gains in the gold price over the entire period of almost 17 years were primarily achieved on Fridays. The blue line depicting the cumulative returns achieved on Friday is in a very steady uptrend. On Friday prices frequently even managed to rise even when the gold price declined overall in the course of the year, such as e.g. in 2014.

In short, Friday is indeed quite an unusual day.

 

The action in gold stocks is even more extreme

Given that Friday appears to hold a special position in the gold market, the question arises whether and to what extent gold stocks are affected by it. After all, the trend in gold stock prices depends on the trend in the gold price.

The next chart therefore shows the annualized performance of the HUI Index of unhedged gold mining stocks since the turn of the millennium (black bar) vs. the annualized performance achieved on individual days of the week (blue bars) since the turn of the millennium.

 

HUI, performance by days of the week, 2000 to 2017 –  Friday shines brightly, Monday is weak

 

Once again Friday is the by far strongest day. Its special status is even more pronounced than in gold itself: gold stocks on average rose by 13.28 percent annualized on Fridays, while the HUI on average gained only 5.76 percent over the week as a whole.  Or putting it differently: Investors who were exclusively invested on this single day every week, were able to achieve more than twice the return delivered by a buy and hold investment!

Moreover, in gold stocks the patterns from Monday to Thursday show a lot more differentiation than those in gold itself. For instance, the average gain recorded on Wednesdays actually exceeded the cumulative gain in the HUI over the week as a whole as well. By contrast, the average performance on Mondays was truly abysmal. Someone who invested in the HUI exclusively on Mondays would have suffered an annualized loss of 9.40 percent!

 

The weekly performance of gold stocks under the magnifying glass

The question of the cumulative performance broken down by days of the week arises in connection with gold stocks as well of course. The next illustration therefore shows the indexed returns of the HUI Index in gray, and those of individual days of the week in other colors.

 

HUI, cumulative performance by days of the week, 2000 to 2017, indexed.  Knocking it out of the park: Friday beats them all.

 

As the chart shows, the blue line depicting the performance of the HUI on Fridays faithfully tracked the rally in gold prices in the first several years after the turn of the millennium. However, a welcome divergence emerged during the financial crisis of 2008, which had almost no discernible effect on the performance achieved on Fridays.

Thereafter, the blue line by and large continued its ascent (only briefly interrupted in annus horribilis 2013), even though the trend in the HUI as such was quite dismal in recent years. Currently the cumulative return achieved on Fridays stands far above that generated by the HUI.

This once again underscores how extraordinary the performance of gold mining stocks on Fridays actually was.

Compare this to the terrible downtrend in gold mining shares on Mondays, which is found at the very bottom of the chart. The yellow line declines steadily. On Monday, prices even tended to decline in years that were otherwise strongly bullish for gold mining stocks.

 

Take advantage of anomalies in gold and mining stocks!

The study shows clearly that anomalies in the performance on individual days of the week are extremely pronounced in the gold sector. Traders and investors can take advantage of them and quickly find a plethora of other exploitable market anomalies with the help of the Seasonax app available on Bloomberg and Thomson-Reuters. While nothing is ever guaranteed in the markets, one should certainly let the probabilities work in one’s favor!

PS: individual days of the week are an underestimated source of unusual performance potential!

 

Dimitri Speck specializes in pattern recognition and trading systems development. He is the founder of Seasonax, the company which created the Seasonax app for the Bloomberg and Thomson-Reuters systems. He also publishes the website www.SeasonalCharts.com, which features selected seasonal charts for interested investors free of charge. In his book The Gold Cartel (published by Palgrave Macmillan), Dimitri provides a unique perspective on the history of gold price manipulation, government intervention in markets and the vast credit excesses of recent decades. His ground-breaking work on intraday patterns in gold prices was inter alia used by financial supervisors to gather evidence on the manipulation of the now defunct gold and silver fix method in London. His Stay-C commodities trading strategy won several awards in Europe; it was the best-performing quantitative commodities fund ever listed on a German exchange. For in-depth information on the Seasonax app click here (n.b.: subscriptions through Acting Man qualify for a special discount! Details available on request).

 

Charts by Seasonax

 

Image captions by PT

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • How to Survive the Winter
      A Flawless Flock of Scoundrels One of the fringe benefits of living in a country that’s in dire need of a political, financial, and cultural reset, is the twisted amusement that comes with bearing witness to its unraveling.  Day by day we’re greeted with escalating madness.  Indeed, the great fiasco must be taken lightly, so as not to be demoralized by its enormity.   Symphony grotesque in Washington [PT]   Of particular note is the present cast of characters. ...
  • Credit Spreads: The Coming Resurrection of Polly
      Suspicion isn't Merely Asleep – It is in a Coma (or Dead) There is an old Monty Python skit about a parrot whose lack of movement and refusal to respond to prodding leads to an intense debate over what state it is in. Is it just sleeping, as the proprietor of the shop that sold it insists? A very tired parrot taking a really deep rest? Or is it actually dead, as the customer who bought it asserts, offering the fact that it was nailed to its perch as prima facie evidence that what...
  • The Strange Behavior of Gold Investors from Monday to Thursday
      Known and Unknown Anomalies Readers are undoubtedly aware of one or another stock market anomaly, such as e.g. the frequently observed weakness in stock markets in the summer months, which the well-known saying “sell in May and go away” refers to. Apart from such widely known anomalies, there are many others though, which most investors have never heard of. These anomalies can be particularly interesting and profitable for investors – and there are several in the precious metals...
  • Business Cycles and Inflation – Part I
      Incrementum Advisory Board Meeting Q4 2017 -  Special Guest Ben Hunt, Author and Editor of Epsilon Theory The quarterly meeting of the Incrementum Fund's Advisory Board took place on October 10 and we had the great pleasure to be joined by special guest Ben Hunt this time, who is probably known to many of our readers as the main author and editor of Epsilon Theory. He is also chief risk officer at investment management firm Salient Partners. As always, a transcript of the discussion is...
  • What President Trump and the West Can Learn from China
      Expensive Politics Instead of a demonstration of its overwhelming military might intended to intimidate tiny North Korea and pressure China to lean on its defiant communist neighbor, President Trump and the West should try to learn a few things from China.   President Trump meets President Xi. The POTUS reportedly had a very good time in China. [PT] Photo credit: AP   The President’s trip to the Far East came on the heels of the completion of China’s...
  • Business Cycles and Inflation, Part II
      Early Warning Signals in a Fragile System [ed note: here is Part 1; if you have missed it, best go there and start reading from the beginning] We recently received the following charts via email with a query whether they should worry stock market investors. They show two short term interest rates, namely the 2-year t-note yield and 3 month t-bill discount rate. Evidently the moves in short term rates over the past ~18 - 24 months were quite large, even if their absolute levels remain...
  • Is Fed Chair Nominee Jay Powell, Count Dracula?
      A Date with Dracula The gray hue of dawn quickly slipped to a bright clear sky as we set out last Saturday morning.  The season’s autumn tinge abounded around us as the distant mountain peaks, and their mighty rifts, grew closer.  The nighttime chill stubbornly lingered in the crisp air.   “Who lives in yonder castle?” Harker asked. “Pardon, Sire?” Up front in the driver's seat it was evidently hard to understand what was said over the racket made by the team of...
  • A Different Powelling - Precious Metals Supply and Demand Report
      New Chief Monetary Bureaucrat Goes from Good to Bad for Silver The prices of the metals ended all but unchanged last week, though they hit spike highs on Thursday. Particularly silver his $17.24 before falling back 43 cents, to close at $16.82.   Never drop silver carelessly, since it might land on your toes. If you are at loggerheads with gravity for some reason, only try to handle smaller-sized bars than the ones depicted above. The snapshot to the right shows the governor...
  • Heat Death of the Economic Universe
      Big Crunch or Big Chill Physicists say that the universe is expanding. However, they hotly debate (OK, pun intended as a foreshadowing device) if the rate of expansion is sufficient to overcome gravity—called escape velocity. It may seem like an arcane topic, but the consequences are dire either way.   OT – a little cosmology excursion from your editor: Observations so far suggest that the expansion of the universe is indeed accelerating – the “big crunch”, in...
  • Claudio Grass Interviews Mark Thornton
      Introduction Mark Thornton of the Mises Institute and our good friend Claudio Grass recently discussed a number of key issues, sharing their perspectives on important economic and geopolitical developments that are currently on the minds of many US and European citizens. A video of the interview can be found at the end of this post. Claudio provided us with a written summary of the interview which we present below – we have added a few remarks in brackets (we strongly recommend...
  • Inflation and Gold - Precious Metals Supply and Demand
      Reasons to Buy Gold The price of gold went up $19, and the price of silver 42 cents. The price action occurred on Monday, Wednesday and Friday though so far, only the first two price jumps reversed. We promise to take a look at the intraday action on Friday.   File under “reasons to buy gold”: A famous photograph by Henri Cartier-Bresson of a rather unruly queue in front of a bank in Shanghai in 1949 in the final days of Kuomintang rule. When it dawned on people that the...
  • Precious Metals Supply and Demand
      A Different Vantage Point The prices of the metals were up slightly this week. But in between, there was some exciting price action. Monday morning (as reckoned in Arizona), the prices of the metals spiked up, taking silver from under $16.90 to over $17.25. Then, in a series of waves, the price came back down to within pennies of last Friday’s close. The biggest occurred on Friday.   Silver ended slightly up on the week after a somewhat bigger rally was rudely interrupted...

Support Acting Man

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com