Bandwagon Effects in the Stock Market

Brett Steenbarger submits:

A little while back I posted about the increasing number of one-sided days in the stock market and how those are affecting traders.Yesterday I noticed another kind of one-sidedness: Seven of the lastnine trading sessions in the S&P 500 Index (SPX) have closedeither in the top or bottom quarter of their day's range.

Thisled me to examine more broadly the issue of how often stock indexesclose near their day's highs or lows. If we divide each day's rangeinto quartiles, then we would assume, over time, that a chancedistribution would put 50% of market closes in the top or bottomquarter of the day's range and 50% in the middle two quarters.

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[Source: SeekingAlpha.com: Home Page]