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Program Trading and Blue Moons

Program Trading & Blue Moons

You've heard the saying "Once in a Blue Moon".   But what exactly is a Blue Moon?  The most commonly accepted definition of a Blue Moon is that it is the second extra Full Moon that occurs in the same calendar month.  Although there are a few slightly different definitions, for purposes of this report we are utilizing this most commonly held belief.

Blue Moons on average only occur about seven or eight times within any twenty year time frame.  Even more rare, is what's known as a "Double Blue Moon" or two Blue Moons in one calendar year.  The last Double Blue Moon year was 1999.  The next one is not until 2018.   Of the Blue Moon trading days since 1900, the Dow has closed exactly 50/50.  However, we decided to look specifically at the Blue Moon trading days since 1982 when the S&P Futures began trading: 

1.  Since then, we found reference to ten Blue Moon trading days.  In those, the S&P's closed negative 60% of the time and the Dow closed positive 60% of the time. 

2.  Eighty percent of these Blue Moon trading days exhibited excessive volatility, posting very significant moves in both directions during the day, with only 20% trading specifically in one direction for the entire day.   Of that 20% (representing 2 of the 10), one was distinctly long and closed positive, and the other was distinctly short and closed negative.  Here are the highs followed by the respective lows (all referenced times are Central Time):
Highs:  3:15, 3:15, 2:55, 2:00, 11:45, 10:50, 9:35, 8:55, 8:50, and 8:35.
Lows: 10:00, 2:25, 8:35, 9:00,  9:05,  2:50,  2:35,  3:15, 3:15, and 11:35.

3.  As our focus is always on timing, we felt you might enjoy seeing the most common entry times for the most significant short and long trades within these ten Blue Moon trading days. These were the most consistent entry times for major moves:
Entry times
short trades: 8:40, 8:55, 9:05, 9:10, 10:50, 11:15, 11:30, 12:10, 12:40, 1:10, 1:25, 2:00, 2:05, and 2:15.
Entry times
long trades long trades long trades:  8:35, 8:45, 9:30, 10:00, 10:05, 10:15, 11:40, 12:20, 12:40, 12:50, 1:05, 1:20, 1:25, 1:30, 2:00, and 2:30.

You will notice above that whether short or long, there were a lot of entry times almost the same on which significant trading moves have been initiated.  That means our real time indicators lined up to verify those times as the key entry time for those trades.

 

So, how often in the past twenty-five years have Blue Moons been on Thursday?

Only twice.  On December 30, 1982 and September 3, 1993.  On those days, the highs were at 9:35 and 10:50, and the respective lows were at 2:35 and 2:50.  And both days closed negative.

 

The Highest Odds Near Blue Moons
Of the ten Blue Moons within the past twenty-five years, we discovered that the most impressive results have actually occurred on the first day immediately after the Blue Moon.

1.  Consider these facts:  80% of the lows occurred within the first hour by 9:25.  And 80% of the highs occurred after 11:00.  The spoos closed positive 70% of the time and the Dow closed positive 60% of the time. 

2.  Unlike the Blue Moon days themselves, at first glance it appears that the first days afterward  seem to have excess volatility take a backseat.   Here are the lows followed by the respective daily highs.
Lows:  8:30, 8:35, 8:45, 9:05, 9:05, 9:30, 9:30, 9:35, 12:20, and 3:15.
Highs:  2:45, 2:00, 1:40, 2:15, 2:40, 8:35, 2:10, 12:30, 8:35,and 11:10.

With our focus always on timing, we felt you might enjoy seeing the most common entry times for the most significant short and long trades within these first days after Blue Moon trading days.  These were the most consistent entry times for major moves:
Entry times
long trades:  8:35, 8:45, 9:00, 9:05, 10:00, 10:20, 10:30, 10:35, 11:00, 11:20, 11:25, 11:40, 12:00, 12:20, 12:35, 1:00, 1:15, 1:25, 1:35, 1:50, 2:05, 2:15 and 2:20.
Entry times
short trades: 8:35, 9:15, 9:25, 10:00, 11:15, 11:45, 12:15, 12:30, 12:40, 1:20, 1:30, 1:40, 2:00 and 2:20.

You will notice above that whether short or long, there were a lot of entry times almost the same on which significant trading moves have been initiated.  That means our real time indicators lined up to verify those times as the key entry time for those trades.

So, how often in the past twenty-five years have the first day after Blue Moons been on Friday?

Only twice.  On December 31, 1982 and October 1, 1993.  On those days, the lows were at 8:35 and 9:30, and the respective highs were at 2:00 and 2:10.  And both days closed positive.

Please remember that past performance on and immediately after Blue Moon trading days is no guarantee that the majority odds will prevail again this Thursday and/or Friday.  However, for those of us who find valuable insight into prior program trading tendencies, these historic facts are most welcome.  After all, we only get to observe them in action once in a Blue Moon.

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