By Jerry W. Atwood
PENSACOLA (June 21, 2011) (Supreme LLC Staff)
Today, June 21, 2011, is the first day of summer. One year ago we wrote the following:
Today, June 21, 2010, is the first day of summer. The corn and the soybeans have been planted, to grow, and then to be harvested in the fall. A definite seasonal trend. Most of us did not like the snow, ice and cold air of the winter, but now it is mostly forgotten so we can now complain about the heat of the summer. A definite seasonal trend.
Then a question was asked. Were there seasonal trends to the stock market? Could they be traded?
In the original article, Change of Season, we presented a table that projected the seasonal trends of the market. Then we proposed that we would check these trends for the next year. Here is the table we presented:
|Date||Explanation||Trend||S and P 500|
|June 21||Buy stocks from the Strong Buy List. Buy carefully and begin to sell off August 1st.||Up||1117|
|August 10||Take a vacation. Hold only the stocks that we are sure we can not live without.||Down||-|
|October 20||Begin to analyze new stock positions.||Up||-|
|November 1||Buy the stocks on the Strong Buy list. Stay active through April, but because of what happened this year, get out before May 1st.||Up||-|
|May 1||Take a vacation. Get ready for the first day of summer.||Down||-|
To be able to check the results and to see if this method is viable, we will buy ten shares of the SPY,
which is the ETF for the S and P 500 index. Therefore, we are starting with $1,117.00 invested in the SPY.
Results from June 21, 2010 to June 20, 2011
June 21 - Our table states that the trend is up and will hold until August 10. At that time we are at 1121 and we are up, but not much. We will sell and if we were counting commission we would be down $10.
August 10 - Our table states that the trend is down and will hold until October 20. Since the trend is down we will sell and stay out of the SPY. On October 20 we are at 1178 and we have missed $57 in profit. The trend was not down.
November 1 - Our table states that the trend is up and will hold until May 1. We will buy back in at 1184 and we will have $1,184.00 invested in the SPY. On May 1 the S and P 500 is at 1361, the trend was up.
May 1 - Our table states that we should take a vacation, so we will sell and have $1,361.00. This is a profit of $177 and a return of 15%. Please note that the trend for May 1 is down and the S and P 500 has dropped from 1361 to 1295 as of June 21, 2011.
1. It would be difficult to make much profit on these trends except for the November to May trend and the downturn on May 1 to June 21. These two trends seem to be well established and occur every year with a few exceptions.
2. It is probably better to let the trends guide us as to when to be aggressive and when to pull back.
3. In the future, here at the Journal of Common Stock we will be fully invested from November to May and will hold off on new purchases from May 1 to June 21.
Gerald Loeb the author of The Battle for Investment Survival probably had the closest idea to a proven method when he wrote:
You will soon began to find out if you are right or wrong on the trend. If you seem to be wrong, quit as cheaply as you can, of course. If you seem to be right, you will want to enlarge your position.