The end of each quarter is a time of the year when prices often ignore technical and fundamental factors. Dominant market participants who manage vast pools of capital often receive compensation based on their investment and trading results at the end of each three-month period. Therefore, the closing prices of assets at the end of a quarter becomes their benchmark for performance and the level that determines their remuneration.
The end of a quarter is a time where market participants should realize that price volatility can give rise to opportunities. Sometimes, a dominant operator may push the price of an asset higher or lower depending on if they are holding a long or a short position. At other times, these players in the market may choose to liquidate a position to reduce their level of risk as they move into a new period.
Markets move higher at times when buying overwhelms selling and they move to the downside when selling is greater than buying. On the final day of a quarter, the price action in most assets can uncover the underlying positions of leading market participants. Warren Buffet once said, “You only find out who is swimming naked when the tide goes out.” The Oracle of Omaha was referring to periods of heightened volatility in markets which tends to reveal those who are on the wrong side of the price move. However, the end of a quarter can be like a low tide period, as market moves can uncover the bias of some of the leading participants who are acting in their self-interest.
For smaller traders and investors who have either a fundamental or a technical orientation to markets, the price action at the end of a quarter can provide golden opportunities to either enter a new risk position or take profits on an existing investment or trade.
The end of a quarter comes around only four times each year. Friday, March 29 is the end of the first quarter of 2019 and the first opportunity this year to take advantage of low tide in markets across all asset classes. At the same time, the price action on the final day of a quarter can reveal significant insight into what those with access to substantial capital are thinking and what they are doing in markets. Keep your eyes open for opportunities in the short and medium-term on the final day of Q1 2019; the window does not open that often.