Selling pressure intensified in August as we saw the first bearish breadth thrust since mid March. I use the 10-day EMA of Advance-Decline Percent to measure breadth thrusts.
Today’s report will dive into monthly seasonal patterns using benchmark metrics and equity curves. The stock market has a long-term bullish bias and the monthly return metrics reflect this positive bias.
The turn of the month shows a strong bullish bias with an extremely stable equity curve that really took off the last few years. This strategy, which is only invested 38% of the time, outperformed buy and hold with a higher Compound Annual Return. Overall, the eight day percentage change at the turn of the month is positive 68% of the time for SPY. Despite strong numbers overall, February is weakest month when testing over the last twenty years, and we just happen to be in February.
Seasonality is behind price action when it comes to analysis and signals, but monthly seasonal patterns can provide a tailwind to existing trends. This study will look at monthly seasonal patterns for the S&P 500 over the last 30 years with a new twist. In addition to win rate, we will also look at returns and the equity curves.