There are certain inescapable facts of the markets that you can use
to your advantage. For instance, the market tends to underperform
in September. That's a statistical likelihood - and it's a great
way to give yourself a leg-up in an otherwise difficult market.
We can profit from this seasonal tendency and others as they
exhibit repetitive price patterns throughout the year. Being aware
of these strong seasonal biases is an important tool that is often
overlooked by investors and traders. Why would you not want to know
about a particular day (or time frame) when
NYSE: QQQ (Nasdaq 100)
has risen 17 out of the last 20 years?
Seasonal tendencies are best used as a forecasting aid. Seasonality
alone is (in almost every case) not a reason place a trade.
However, when compared with the current state of the market at the
time the seasonal tendency arrives, the probability of a successful
trade can be increased tremendously. It is important to always be
aware of the market's seasonal picture.
I make a point to mention seasonal tendencies as they arrive in my
commentary on the
Wyatt Investment Research
and in the near future, we will be offering an array of seasonal
info including research articles, charts, etc within my
My preference is to use seasonal tendencies to assist me when
making a short to intermediate-term trade. By looking at market
performance on a specific time frame, whether it is a specific day,
month, etc. you will start to see glaring seasonal tendencies. As
you delve further into the seasonal calendar you will start to
notice tendencies around option expiration, holidays, and the days
surrounding the beginning/end of the month. Some months have
greater tendencies than others (some are actually bearish), but
wouldn't it be to your advantage to know these types of biases.
When trading my strategies it always advantageous to know if any
seasonal trends are on the horizon. For example, if the market is
currently overbought and the market gaps higher normally I would
not hesitate to place a trade, but if there is an unusually strong
seasonal bullishness on this particular day I might take a smaller
position, not place the trade at all, or possibly try to get a
better price knowing that the seasonal bullishness on this
particular day quickly moves into a bearish period the following
day or so. This is just a one of many ways I like to use
seasonality to my advantage.
I will be constantly discussing seasonal conditions as they arise
including market performance around holidays, market performance
around options expiration, average gains around the beginning of
each month as well as a few sentiment indicators including Put/Call
ratios, Rydex Fund assets, Trader Commits, Investor Surveys and
various other seasonal and sentiment-based indicators.
So what about today's seasonality? I wrote about
September seasonality last week
and the results were not good.
The 2.6 percent loss during the first three trading days of the
month is actually the second worst start in September in the
S&P 500's history.
There have only been 5 other occurrences where the S&P 500 has
lost more than 3 percent during the first three trading sessions of
September and according to analyst Jason Goepfert that has spelled
trouble for the benchmark index going forward.
He states that all 5 instances witnessed additional declines of
over 9 percent during September and every one closed lower by the
end of the month at least 5.8 percent.
Here are the years courtesy of
And, now we are entering one of the weakest periods of the year.
Not one trading day over the next six days are historically
So, with that being I am still looking for opportunities to
sell credit spreads
like the ones I have mentioned over the past month.
P.S. If you want to hear more about my options strategies, I'd like
to invite you to sign up for a free event I'm holding NEXT Tuesday,
September 20th.. I'll be going over some more of my favorite
options trades, and I'll be giving you information on how you can
receive my trades for yourself on a regular basis.
I urge you to sign up quickly if you're interested - don't wait
until the last minute. Not everyone will be able to take part in
Click here to get signed up immediately