The end of the month trading has a different vibe. Volume increases, institutions are hopping in the market, funds are making adjustments to their positions within the last 3-5 days to the end of the month and stock prices rise.
But who leads? What should traders focus on? The answer is SMALL CAP STOCKS The end-of-month phenomenon has a more pronounced effect on small-cap and low-priced stocks. Research shows that small-cap stocks have considerably higher returns on the last day of the month versus high-cap stocks. This finding is not considered a variation of the historical trend among small-cap stocks to outperform high-caps. Having said that, high-priced or large-cap stocks can also experience the end-of-month effect.
Below is the performance of IWM into the end of 4 consecutive months May – End of August 2021. Notice the rallies that are happening at the end of the month.