Monday Effect

Long time ago it was found that on Mondays the stock market continues its Friday’s move. If on Friday one sees a market drop, then there is a high probability of further stock price drop on Monday. If Friday was good for stock prices, then one can expect continuation of the positive market move on Monday. This is so called the Monday effect in the stock market

This effect is related to the weekend market analysis performed by millions of investors and traders. Many people think “linearly”. They believe in trends. If they see rising stock prices, they expect continuation of this short-term trend. Their decision is simple: we should buy stocks on Monday to catch the train. If people see falling stock prices, they become pessimistic and decide to sell stocks on Monday

The Monday effect of continuation of short-term trends has been confirmed. This effect is strong for actively traded tech stocks. On Tuesdays one can expect the reverse of short-term market trends.

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