S2N Spotlight
I came across the code for this idea from Jason Strimpel, a Python trader and educator. The idea is simply that most fund managers like to show their clients that they are holding safe investments when they are forced to report their portfolio holdings at the end of every month. That means when the cats are away, the mice can play, and it seems they do.
This is a very loose piece of research but informative nonetheless. You will see in the plot below that the average daily return for the first 7 days of the month is down (selling pressure), and for the last 7 days the average daily return is up (buying pressure) for TLT. This is an ETF for the 20+ year US Treasury bonds.
The implication from this is that money is pulled from the safe asset during the month and invested in other more speculative assets. I haven’t done or researched the extent of this playing cat and mouse, but I have put the idea through a backtest and come up with these results for a strategy of selling at the end of day 7 and buying at the beginning of day 24.
There is a clear improvement in performance over time with this strategy. It seems these kinds of strategies are persistent with their outperformance, as they are built off the back of an industry quirk.
S2N Observations
The world hasn’t been in such a precarious geopolitical space in many decades. Yet the G20 held in Peru over the weekend was hardly a talking point. Jake Paul beating Tyson and Jon Jones beating Stipe were probably more newsworthy.
S2N Screener Alerts
Gold and wheat futures are having months with price action that is rare.
Performance Review
For those who are new to the letter, the shading is Z-Score adjusted so that only moves bigger than usual for the symbol are highlighted.