It’s Friday, which means that if you have long positions, you are likely to be calculating the risks of holding those positions over the weekend and imagining what sort of headlines might greet you and your portfolio on Monday morning.
There is so much headline risk – or at least perceived headline risk – out there right now that I suspect it will be very difficult for the bulls to put together a sustained rally today. That being said, each Friday going forward is going to be a litmus test of sorts for the bulls, particularly next Friday, which falls just before a three day weekend in the US.
Though this is only the sixth Friday of 2008 and far from enough data points to begin talking about statistical significance and confidence intervals, the first five Fridays of the year have a mean loss of 1.30%, while Mondays through Thursdays have only seen an average drop of 0.37% over the first 21 non-Friday sessions of the year.
In simplistic terms, I do not think that the bulls can make a credible case for a market turnaround as long as they are unwilling to bid prices up in advance of the weekend. When Fridays start looking up and weekend risks start looking palatable, this may be one of the signs that we have put in a bottom.