"Black Monday" Follow-up | Senior Trader: Classic Pattern "Tense on Thursday, Hedge on Friday, Sell-off on Monday, then Rebound on Tuesday", but
"Tuesday Turnaround" refers to the trend where the market stabilizes or even rebounds on Tuesday after experiencing adjustments in the past week. However, analysis indicates that even if the stock market sees a strong rebound on Tuesday this time, it may not alleviate the general anxiety over the growth in financial markets
The stock market fluctuated this week, once again confirming the widely circulated phenomenon of "Turnaround Tuesday", where after a week of adjustment, the market stabilizes or even rebounds on Tuesday.
However, analysis points out that unlike in the past, this recovery does not guarantee that the bottom has been reached.
Senior trader and President of trading analysis company Spectra Markets, Brent Donnelly, stated that during a stock market crash, investors' psychology often starts with tension on Thursday, hedging on Friday, and selling off on Monday. By Tuesday, the downtrend will reverse.
Data compiled by Bloomberg macro strategist Cameron Crise since 1928 supports this point. When the S&P 500 index has consecutively declined on Thursday, Friday, and Monday 582 times, it has on average risen by 0.2% on the following Tuesday, with an annualized return of 50%.
The trend of the past week confirms this point. The first three trading days all saw declines of over 1%, but on Tuesday, the increase averaged 0.63%.
Donnelly mentioned that he is preparing for the textbook "Turnaround Tuesday":
The market is so oversold, and Tuesday is a bullish day this week. I am looking for tactical reverse trades, such as long positions on the Canadian dollar against the Swiss franc.
However, even if the stock market sees a strong rebound on Tuesday, it may not alleviate the general anxiety of the financial markets' overall growth. Investors who trade based on quantitative indicators like volatility have reduced their stock positions by $130 billion over the past few weeks, and this process may accelerate in the coming days and weeks.
"I don't think this is a sustained rebound," said Nick Ferres, Chief Investment Officer of Singapore's Vantage Point Asset Management:
Volatility may continue into October and November. If there is a counter-trend rally today and it lasts for weeks, then it would be a good time to reduce risk.
Ferres bought Japanese stocks on Monday when prices fell, saying "I even regret not buying more. In hindsight, we should have bought more."