Terrific Tuesday: Why the Dow Loves the 2nd Day of the Week

dow jones industrial average electronic board wall street trading floor
Richard Drew/AP

By Ben Rooney

The Dow Jones industrial average has posted gains every Tuesday for the past 20 weeks.

That makes it the longest winning streak for any day of the week since 1900, according to Ryan Detrick, chief technical analyst at Schaeffer's Investment Research. The previous record was 13 (a three-way tie between Monday, Wednesday and Friday).

The bulk of the Dow's (^DJI) gains this year were reached on Tuesdays. Detrick said the index has added a total of 1,518 points during the 21 Tuesdays that the market was open in 2013.

While it could be a fluke, the run begs the question: Why Tuesday?

Here are some of the leading theories making the rounds on Wall Street, courtesy of David Lutz, head ETF trader at Stifel Nicolaus.

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It's random. There may be no explanation. Tuesday is just a day, like any other. That said, the trend has been remarkably consistent over a long period of time.

POMO. The Permanent Open Market Operation, or POMO, is the official name for the Federal Reserve's bond-buying program.

Tuesdays and Fridays have been among the largest purchase days of the week, and there tends to be an upward bias in the stock market on days when the Fed is buying bonds.

Mutual funds. Investors have poured billions of dollars into stock-based mutual funds this year, with an average of $3 billion coming into the market each week.

Many mutual fund investors, who typically don't trade for a living, place orders to buy or sell stocks over the weekend. But the orders need to be cleared and the funds usually aren't put to work until late Monday or early Tuesday.

Algos. Automated trading programs, or algorithms, make up an increasingly large portion of all stock trading.

The longer the Tuesday trend is in place, the more likely it is that these computer automated trading systems will be programmed to buy on that day, making it self sustaining.

No one likes Monday. Another theory is that the Tuesday gains are merely a reversal of Monday losses.

The Dow has ended in the red for 12 out of the 18 Mondays that the market was open this year, said Detrick.

In what has become known as "turnaround Tuesday," investors who have been sitting on the sidelines use the pullback buy stocks at a discount.

"Monday is hands down the weakest day of the week so far this year," said Detrick. "Tuesday has lived up to its 'turnaround Tuesday' nickname and been just as strong on the upside."

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