How Big Is Big?

Yves Smith, in a morning piece entitled, 'Is This the Start of the Big One?'* with reference to a proposed and pending stock market crash, raises the not entirely related (Ambrose lives) issue of possible market manipulation at the daily close on American exchanges.

The hand-rolled black line in the chart compares the tendencies of the SPX and the DAX (which shuts down at 11:30 AM New York time) to finish the day closer to their maxima, or vice versa - a point which should be of some interest in this regard. Positive numbers favour the SPX 'ramp' thesis.

A quick look shows the month of July 'confirming' this, and March the opposite. In general terms, the whole effort has the look of simple mean reversion. On the other hand, a real statistician might want to take a look at the matter.

*Consciously passing on all sorts of fun stuff we could generate from Ms. Smith's choice of words, one has to wonder exactly - all of us having lived through the aftermath of the demise of Lehman Brothers - what kind of event would have to take place for her to classify it as satisfactorily 'big'.

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