In 2008 the S&P 500 Index from May to November followed the trading maxim
pretty well, of course, the collapse of the market in the fall of 2008
was a contributing factor.
What’s behind these supposed seasonal patterns? Stock analysts have
lots of reasons and theories.
Normally in the summer most traders will take a vacation traders are away
from their offices, the volume is low and it is not a busy time for
most brokers and businesses and the amount of new traders will be low.
Stock analysts have shown that to be true over many years with
historical seasonal pattern. The price of stocks has gone down and
lose value about two percent of the time in the summer slow down. The
months that showed the best gains were November to April on average.
There is a fifty percent chance that there will be a down month between
November to April. January and April are usually the stock market’s
best months depending on how well the holiday shopping season was. The
studies have shown that June and September are the poorest months for
the stock market.
These figures do not count for the extreme high and lows caused
by news that can create wild swings in the markets. They are based on
a average compared to the price of the S&P 500 Index.
The May to November pattern has held up over the past seven of twelve
years. So the bottom line is seasonal patterns do effect the stock
market but it is still how a traders makes their trades that counts.
Trying to trade the seasons is not a convincing argument for the seasonal
strategy but doing your own research and due diligence will make you
more money in the long run trading the stock market. |
