July 21, 2017

Seasonal Bias Surrounding President’s Day

Immediately following Mr. Bernanke’s optimistic statement on the health of the economy was released at 10:00 EST the market surged and never looked back. The rally brought the S&P and Dow back into an overbought state and the tech-heavy NASDAQ and Russell are fast approaching. The bounce off the oversold conditions and strong support levels on Monday proves that the bulls are still in charge, at least for the moment.  

I came across an interesting seasonal statistic that involves the days surrounding President’s day (five days before and after). I would never attribute a move like today’s to seasonality, but I do find it interesting that the third trading day before President’s day is overwhelmingly higher on average. The third day is positive roughly 75% of the time with an average return that exceeds 0.3%. The other days are noticeably weaker with the day before and the day after being the weakest. That means, according to the seasonal stats, that Friday (option expiration) and Tuesday will be lower. If it was only that easy. I do like to look at the seasonal picture to see if it lines up with an anticipated move. I would never trade solely on seasonality, but I do find that it is a wonderful aid.

Could the market possibly follow the historical seasonal precedent? With the indices sitting in an overbought state and QQQQ near an area of strong overhead resistance I think a short-term reprieve is in order. Moreover, we had a small gap higher today that was never closed so that always adds some extra weight as well. If the market struggles to move higher early tomorrow I might be tempted to take a short-term position.

Have a wonderful Valentine’s Day!

and we will do our best to save you a spot once we make the portfolio live, which will occur after the March expiration cycle.

Overbought/Oversold levels for February 14, 2007

  • SPY – 70.2 (overbought)
  • DIA – 73.2 (overbought)
  • IWM – 63.6 (neutral)
  • QQQQ – 68.2 (neutral)
  • OIH – 59.5 (neutral)
  • GLD – 75.5 (overbought)

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Have a great night!