The “First Day of the Month” Trading System

By Lawrence G. McMillan

About this time last year, a popular study was released that showed the results of trading just the first trading day of the month.  That is, buy “the market” at the close of the last trading day of one month and sell out your position at the end of the next day – the first trading day of the new month.   In 2010, it was so successful that one could have captured 93% of the $SPX gain for the entire year by just being invested on 12 days – the first day of each month.  We did a full analysis of this in The Option Strategist newsletter at that time (Volume 20, No. 2). 

Last year started strong, with big gains on the first trading days of January and February 2011.  But then the system stumbled, registering five consecutive losses from August through December of 2011.  There had been other losing years since 1991, all bear market years: 1994, 2002, 2008, and now 2011.  This year, once again there were big gains on the first trading day of January and February.   Now March has registered a gain as well...

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