Ask Matt: Are late-day rallies bullish?

Q: Are late-day rallies bullish? 

A: Weakness in the morning and strength in the afternoon. That's been the pattern of stock trading, leaving some to wonder what these late day rallies mean. Here's one interpretation.

First, some data. If it seems like stocks are rallying in the afternoon, your hunch is right. Looking at average intraday trading patterns in the Standard & Poor's 500 since May 21, 2015, Bespoke Investment Group pinpointed a trend. Looking at trading over this time shows stocks weaken in the first two hours of the trading day, but at 11:30 a.m. ET buyers come in. Most of the intense buying seems to kick in during the final hour of the trading day, Bespoke found.

Among traders, such late-day buying is seen as being bullish. Typically "smart money," or large institutional buyers, are thought to do most of their trades later in the day, Bespoke says. Less informed and smaller individual investors typically place their trades in the morning before heading to their day jobs. Investors who believe this "Smart Money Indicators" see the late day buying as a positive since it shows more large investors are jumping in. Late-day buying also shows conviction as investors are willing to hold their positions overnight.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.