Seasonal Tendencies Following Unusually Large Monthly Gains
By
Rennie on Thursday, September 30th, 2010 at 9:50 pm
Kudos to Wayne Whaley for another timely market commentary. He notes in his recent update that when the S&P closes out the month with better than a 7.5% gain, the market has typically continued to push higher in the first week of the following month. Wayne showed the last 11 occurrences in his column, so out of curiosity I examined all occurrences since 1950. I found a total of 28, all of which are listed below along with the S&P’s performance over the next week…
S&P Closes Out Month w/ 7.5%+ Gain
09/30/10… S&P ??? five sessions later
04/30/09… S&P +4.0% five sessions later
03/31/09… S&P +2.2% five sessions later
04/30/03… S&P +1.4% five sessions later
10/31/02… S&P +1.9% five sessions later
11/30/01… S&P +1.7% five sessions later
04/30/01… S&P +1.1% five sessions later
03/31/00… S&P +1.2% five sessions later
10/30/98… S&P +3.9% five sessions later
07/31/97… S&P -0.3% five sessions later
12/31/91… S&P +0.2% five sessions later
05/31/90… S&P +0.5% five sessions later
07/31/89… S&P +1.0% five sessions later
01/30/87… S&P +2.2% five sessions later
08/31/84… S&P -1.5% five sessions later
10/29/82… S&P +6.3% five sessions later
08/31/82… S&P +2.3% five sessions later
11/28/80… S&P -4.6% five sessions later
04/28/78… S&P -0.3% five sessions later
01/30/76… S&P -1.4% five sessions later
01/31/75… S&P +2.1% five sessions later
10/31/74… S&P +1.8% five sessions later
12/31/71… S&P +1.4% five sessions later
04/30/68… S&P +1.5% five sessions later
01/31/67… S&P +0.4% five sessions later
11/30/62… S&P +1.3% five sessions later
06/30/55… S&P +3.9% five sessions later
11/30/54… S&P +2.0% five sessions later
09/30/54… S&P +1.2% five sessions later
In 23 out of 28 cases, or 82% of the time, the S&P closed higher one week later, significantly greater than the 56% random chance for a higher S&P one week later. This jibes with another seasonal setup recently discussed at the end of July – that is, when the market gains over 3% in the three weeks preceding the last three days of the month, the first week of the following month usually sees further upside. If you do not receive Wayne’s commentary, email wayne@witterlester.com, with subject, “Add to Email List”. Highly recommended!
On a shorter-term basis, it’s noteworthy that SPY traded above R3 (per Brett Steenbarger’s calculations) in the first 30 minutes of Thursday’s session before giving back all of the day’s gain over the course of the next two hours. Looking back at the last 30 instances in which SPY traded above R3 intraday but settled lower, we find a tendency for higher prices the following session…
SPY Trades Above R3 Intraday, Closes Lower
09/30/10… SPY ??? next session
06/21/10… SPY -1.7% next session
06/09/10… SPY +2.9% next session
05/26/10… SPY +3.4% next session
05/07/10… SPY +4.4% next session
03/25/10… SPY -0.1% next session
12/15/09… SPY +0.2% next session
07/16/09… SPY +1.1% next session
12/17/08… SPY -1.9% next session
09/02/08… SPY -0.1% next session
04/30/08… SPY +2.1% next session
03/12/08… SPY +0.3% next session
01/30/08… SPY +1.8% next session
01/08/08… SPY +1.1% next session
12/11/07… SPY +1.0% next session
12/07/07… SPY +0.8% next session
10/19/07… SPY +0.6% next session
10/16/07… SPY +0.3% next session
10/11/07… SPY +0.6% next session
09/20/07… SPY -0.2% next session
07/31/07… SPY +0.5% next session
07/17/07… SPY -0.2% next session
06/28/07… SPY +0.0% next session
05/31/07… SPY +0.5% next session
05/01/07… SPY +0.9% next session
02/22/07… SPY -0.4% next session
01/03/07… SPY +0.2% next session
08/04/06… SPY -0.2% next session
06/09/06… SPY -1.1% next session
05/23/06… SPY +0.8% next session
04/03/06… SPY +0.6% next session
Out of 30 occurrences, 21 led to a higher SPY close one session later. That 70% win rate is not significantly better than the 54% random chance for a higher SPY one day later. However, note that even when wrong, downside potential was typically limited to 0.5% or less. Only three times out of the last 30 occurrences did the SPY close down more than 0.4% the next day, while it rallied more than 0.4% sixteen times.
Seasonal Tendencies Following Unusually Large Monthly Gains
By Rennie on Thursday, September 30th, 2010 at 9:50 pmKudos to Wayne Whaley for another timely market commentary. He notes in his recent update that when the S&P closes out the month with better than a 7.5% gain, the market has typically continued to push higher in the first week of the following month. Wayne showed the last 11 occurrences in his column, so out of curiosity I examined all occurrences since 1950. I found a total of 28, all of which are listed below along with the S&P’s performance over the next week…
S&P Closes Out Month w/ 7.5%+ Gain
09/30/10… S&P ??? five sessions later
04/30/09… S&P +4.0% five sessions later
03/31/09… S&P +2.2% five sessions later
04/30/03… S&P +1.4% five sessions later
10/31/02… S&P +1.9% five sessions later
11/30/01… S&P +1.7% five sessions later
04/30/01… S&P +1.1% five sessions later
03/31/00… S&P +1.2% five sessions later
10/30/98… S&P +3.9% five sessions later
07/31/97… S&P -0.3% five sessions later
12/31/91… S&P +0.2% five sessions later
05/31/90… S&P +0.5% five sessions later
07/31/89… S&P +1.0% five sessions later
01/30/87… S&P +2.2% five sessions later
08/31/84… S&P -1.5% five sessions later
10/29/82… S&P +6.3% five sessions later
08/31/82… S&P +2.3% five sessions later
11/28/80… S&P -4.6% five sessions later
04/28/78… S&P -0.3% five sessions later
01/30/76… S&P -1.4% five sessions later
01/31/75… S&P +2.1% five sessions later
10/31/74… S&P +1.8% five sessions later
12/31/71… S&P +1.4% five sessions later
04/30/68… S&P +1.5% five sessions later
01/31/67… S&P +0.4% five sessions later
11/30/62… S&P +1.3% five sessions later
06/30/55… S&P +3.9% five sessions later
11/30/54… S&P +2.0% five sessions later
09/30/54… S&P +1.2% five sessions later
In 23 out of 28 cases, or 82% of the time, the S&P closed higher one week later, significantly greater than the 56% random chance for a higher S&P one week later. This jibes with another seasonal setup recently discussed at the end of July – that is, when the market gains over 3% in the three weeks preceding the last three days of the month, the first week of the following month usually sees further upside. If you do not receive Wayne’s commentary, email wayne@witterlester.com, with subject, “Add to Email List”. Highly recommended!
On a shorter-term basis, it’s noteworthy that SPY traded above R3 (per Brett Steenbarger’s calculations) in the first 30 minutes of Thursday’s session before giving back all of the day’s gain over the course of the next two hours. Looking back at the last 30 instances in which SPY traded above R3 intraday but settled lower, we find a tendency for higher prices the following session…
SPY Trades Above R3 Intraday, Closes Lower
09/30/10… SPY ??? next session
06/21/10… SPY -1.7% next session
06/09/10… SPY +2.9% next session
05/26/10… SPY +3.4% next session
05/07/10… SPY +4.4% next session
03/25/10… SPY -0.1% next session
12/15/09… SPY +0.2% next session
07/16/09… SPY +1.1% next session
12/17/08… SPY -1.9% next session
09/02/08… SPY -0.1% next session
04/30/08… SPY +2.1% next session
03/12/08… SPY +0.3% next session
01/30/08… SPY +1.8% next session
01/08/08… SPY +1.1% next session
12/11/07… SPY +1.0% next session
12/07/07… SPY +0.8% next session
10/19/07… SPY +0.6% next session
10/16/07… SPY +0.3% next session
10/11/07… SPY +0.6% next session
09/20/07… SPY -0.2% next session
07/31/07… SPY +0.5% next session
07/17/07… SPY -0.2% next session
06/28/07… SPY +0.0% next session
05/31/07… SPY +0.5% next session
05/01/07… SPY +0.9% next session
02/22/07… SPY -0.4% next session
01/03/07… SPY +0.2% next session
08/04/06… SPY -0.2% next session
06/09/06… SPY -1.1% next session
05/23/06… SPY +0.8% next session
04/03/06… SPY +0.6% next session
Out of 30 occurrences, 21 led to a higher SPY close one session later. That 70% win rate is not significantly better than the 54% random chance for a higher SPY one day later. However, note that even when wrong, downside potential was typically limited to 0.5% or less. Only three times out of the last 30 occurrences did the SPY close down more than 0.4% the next day, while it rallied more than 0.4% sixteen times.