Weekday price paths are regime-dependent

How a weekday path is built

A weekday path is a compounded close-to-close series that updates only on one named trading day and stays unchanged until that weekday returns. On that day the path chains the session close-to-close ratio, the current close divided by the prior trading session close, onto the prior cumulative value. Until the same weekday returns, the path is held flat.

From December 23, 1986 through January 11, 1989, each weekday had about 100 sample sessions. Each weekday path chained that day's close-to-close ratio onto the prior cumulative value, then held flat until the same weekday returned.

What the sample window showed

In that window, Tuesday and Wednesday closes rose more often than Thursday and Friday closes, and Monday was an up day less than 50 percent of the time. Those counts are day-of-week tendencies: a repeated weekday-level tilt toward gain, loss, or flat change inside a stated sample window. Tuesday produced the most consistent weekday path in the sample. Friday did not display a stronger weekday path than Tuesday, Wednesday, or Thursday.

Monday's large negative contribution in that window was concentrated on October 19, 1987. A Monday path that omitted that crash session still showed a fairly steady downward close-to-close tendency.

Over the same roughly two-year span the broad market spent most of its time in an uptrend, so weekday paths have to be read against a rising backdrop.

When a weekday path changed slope

Wednesday's path rose until the beginning of 1988 and then flattened even though the general market continued higher. Thursday showed the sharpest slope change: a strong upward path until around the 1987 crash, then a downward path that later flattened or began to turn up.

Weekday gain, loss, and flat tendencies were present. When those tendencies changed they appeared to shift in a regular, mutually dependent way. A regime break is a change in a weekday path's slope after a market-wide shock, or a later flattening against a still-rising broad market.

Editorial: a calendar filter needs a second gate

Editorial reading: weekday seasonality is a two-gate procedure. The first gate is a calendar filter, a rule that admits, exits, or withholds a trade solely because of the weekday of the bar. The second gate is a regime gate, which allows that calendar filter to fire only while the weekday path remains in the same slope state as the recent sample.

Editorial: a calendar filter is incomplete unless it also specifies when the same weekday must be ignored. After a regime break, the weekday is still on the calendar, and the procedure withholds it.