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You may find the following study (see attached chart) interesting.
The chart shows the _average_ price change of the OEX measured from
the close of one expiration Friday to the next, where the idealized
index is set to 100 at the close of the preceding expiration
Friday. The x-axis is "backwards", in that it measures the
number of weeks until epiration (goes from high to low).
Two lines are shown: (1) expirations cycles with 4 weeks,
and (2) expiration cycles with 5 weeks. The two lines are
normalized, with respect to the number of weeks left until
expiration. There are approximately two 4 week expiration
months for each 5 week month.
Conclusions:
1) 5 week months show (on average) a strong upward tendency.
This is probably partially due to calendar monthly seasonal
effects, where for example, the month of November had a
strong tendency to be a big up month during the period
shown (1997 to Feb-2000), and happens to also be a 5 week month.
2) Keeping in mind that the period 1997 to 2000 is predominately
a strong uptrend with quick corrections, it is interesting that
the 4 week months were a little worse than break-even on average.
The low-point of the 4 week month tended to be the second
Tuesday following the preceding expiration Friday, and the
high point occurred just over a week later.
3) The low point for the 5 week expiration cycle tended to be
the first Tuesday following expiration, with the high point being
the very end of the expiration month.
4) The period from the Friday preceding expiration Friday until
the day before expiration Friday (ie, Thursday) was on average
up, for both 4 and 5 week expiration months, but much more so
for the 5 week expiration month.
5) Expiration Friday tended to be a down day for 4 week
expiration months.
6) March is a 4 week month. If it plays out according to plan,
the trend is up until Thurs. April is a 5 weeek month, so
this coming Friday is the time to buy. <g>.
disclaimer: past history is not an indication of future success.
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