LET’S play a little game. You’ll know if I win in about two months.
For better or worse, I’m gonna guess what the stock market will do in the weeks ahead based on nothing but the calendar.
Wednesday was a good day for Wall Street, yesterday wasn’t. The calendar would have predicted Wednesday’s performance but not yesterday’s.
The computers said yesterday should have been an up day because it was the last session of the month in which traders could buy or sell stocks and have those trades counted toward their May performance. And they should have been buying – not selling like crazy.
That’s a simple example of profiling – figuring out what the stock market should do based on what it has done in the past.
I won’t be using a computer like Wall Street firms do, but my sources and I have been paying close attention to the trends that Wall Street has adopted, and we are prepared to make guesses.
On the day before the Memorial Day weekend there’s a bias toward an uptick in stock prices. Last year the Dow rose 92 points.
Volume may dry up because of vacations, but during Memorial Day week the market was up 16 years in a row until it suffered three straight declines in 1996, ’97 and ’98.
Last year the Dow jumped 240 points during Memorial Day week.
Don’t expect volatility. In fact, you can probably anticipate dull markets until June 8 or 9.
Around June 8, professional traders should start goosing the stock market higher in anticipation of the triple expiration on Friday, June 16.
That’s the day stock futures, stock options and index options all expire at the same time. Stock prices rise as the pros almost always manipulate the market for their own benefit.
Right after the triple witching, there’s another very predictable event: end-of-the-quarter window dressing.
That’s when money managers who don’t have much to show for themselves, this quarter push the stocks they own sharply higher so customers can marvel at their performance.
The second quarter hasn’t been a good one. So you can bet that the portfolio jockeys will be applying the whip to their stocks, starting the week of June 19.
June 28 is the last day traders can get credit for these manipulations, so you can expect the markets to die down by then. But most of the pros will get their trades out of the way days before, since the Federal Reserve meets on June 27 and 28 to decide on another interest rate hike.
“Profiling is very prevalent in the large, leveraged trader community – hedge funds, bankers and brokers – because it works. Through computer screenings, they can put in the factors that exist – including the time of year and time of day – and they can find out the probability for rallies and declines,” says Bill King, former head stock strategist at several Wall Street firms.
“This goes beyond the simple seasonality that has existed in markets over the years,” says King, now strategist for his own firm Ramsey King Securities in Burr Ridge, Ill.
In the old days, traders used to play the few trends that they recognized. For example, everyone wanted to ride the summer rally (which, incidentally, is a largely discredited concept) or derive the benefits the market usually gets from an upcoming presidential election.
But the profiling has become much more sophisticated than that.
In fact, the stock market can and does move on many days by hundreds of points simply because of what the computers say it should be doing. Barring any bad news from Alan Greenspan or an unexpectedly bad economics report, the market usually does what the Street wants.
Ever notice the last hour rallies that the profilers have come to rely upon?
So the profile above says the market should be safe until the the middle of the third week of June. After that it gets very tricky.
Remember, there is a Wall Street bubble in place that will someday cause most people to wish they never heard of stocks. The next time to worry will probably be a few days before the Fed meeting on June 27-28. Please send e-mail to jcrudele@nypost.com