Short Interest and Stock Returns: Why Midweek Trading May Hold the Edge
Author:
S3 Research Team
A two-year analysis of SPX and NDX returns shows Monday, Wednesday, and Friday have consistently positive moves, while Thursday is notably weak. Short interest trends further support these patterns, with key short covering on Wednesday. Understanding daily market rhythms may offer a tactical trading advantage.
Monday Wednesday and Fruday all have positive returns. Tuesday and Thursday have close to 0 returns.
FOMC is on Thursdays.
The NDX return is a few percent higher.
Thursday is the only negative day.
Going long Monday, Wednesday, or Friday may be a good strategy.
We did the same analysis using short interest. Because of the day count issues the data needs to be lagged for 2 days.
The QQQ position is much more volatile than the SPX position. The biggest day is Tuesday for shorting and Wednesday for covering.
Thursdays the stocks go down and so do the short positions as positions are closed,
Mondays are up for stocks, but the position is down, so going long both stock and short,
Wed the QQQ is up, and the short position Is down so bullish in both cases.
Short positions are established on Friday when the market is up.
Patterns in daily returns and short interest activity point toward a structured weekly bias in both SPX and NDX performance. Monday, Wednesday, and Friday exhibit strength, while Thursday stands out as a downside risk. Incorporating this insight into positioning
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