Our friend and fellow market veteran, Jim Brown over at Option Investor took a look at some seasonal factors in his market note over the weekend. Here’s a bit:
April has been the best performing month for the Dow since 1950. Over the last 20 years the Dow has posted gains 16 times with an average of +0.56%. Granted that is not much and only equates to about 90 points. The first trading day of April is the worst “post holiday” session of the year. However, the first two weeks of April are normally bullish with an average gain of +1.22%. The average gain for the first two weeks of the other 11 months is only 0.3%.
April is the end of the “best six months of the year” for the markets and May begins the “worst six months.” I just call it the summer doldrums but numerous analysts have built very successful trading strategies around the best/worst six month periods. The “sell in May” strategy has a pretty good record but it is not infallible. With earnings plunging I would say we could have a head start on that worst six month period.
Jim also noted:
The S&P 500 has not had back-to-back gains since Feb 13-17. That’s 28 straight days and the longest such streak in over 20 years. This has only happened twice since World War II. Hat tip to Eddy Elfenbein.
The back to back phenomenon could suggest the market is at an inflection point but corroborating evidence is needed.