Logo Background RSS

Advertisement

Six-Month Seasonality Turns Unfavorable!

  • Written by Syndicated Publisher 2 Comments2 Comments Comments
    May 5, 2012

    May 1 marked the beginning of a 6-month period of unfavorable seasonality. Research published by Yale Hirsch in the Trader’s Almanac shows that the market year is broken into two six-month seasonality periods. From May 1 through October 31 seasonality is unfavorable, and the market most often finishes lower than it was at the beginning of the period.

    ————————–
    (Excerpt from the May 4, 2012 blog for Decision Point subscribers.)

    Click here for FREE TRIAL!
    —————————

    The period from November 1 through April 30 is seasonally favorable, and the market most often finishes the period higher. (See Sy Harding’s book, Riding the Bear, for an indepth discussion of this subject.) While the statistical average results for these two periods are quite compelling, trying to ride the market in real-time in hopes of capturing these results is not always as easy as it sounds. Below is the one-year chart that that shows the most recent two six-month periods. It begins on May 1, 2011 and ends on April 30, 2012.

    The left half of the chart shows the unfavorable May through October period and the right half shows the favorable November through April period. The green line marks the beginning of the favorable period, the red line marks the beginning of the unfavorable period.

    2012_seas

    As you can see, the last two seasonality periods turned in textbook performance, with the unfavorable period closing lower, and the favorable period closing higher. However, in the members area of the website we have a series of these charts going back to 1950 (when the seasonality tendency first appeared), and we can see that, regardless of how the market performs on average, every year is different and presents its own challenges, and there is no guarantee that any given period will conform to the average. In fact, it is our observation that bull and bear market pressures will override seasonal tendencies more often than not.

    Conclusion: Be aware of current seasonal tendencies, but first and foremost follow the primary trend. Currently, we are in a bull market, but it appears to be forming a top, which coincides nicely with the change to unfavorable seasonality. This does not mean that the bull will not reassert itself, but seasonality will not be assisting the bull in that endeavor.

    Images: Flickr (licence attribution)

    About The Author

    Carl SwenlinCarl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.

     
    Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInPin on PinterestShare on StumbleUponShare on RedditShare on TumblrDigg thisBuffer this pageFlattr the authorEmail this to someonePrint this page

Advertisement

Closed Comments are currently closed.