The S&P 500’s Seasonal Indicator Turned Weak on April 3rd

The seasonal indicator is not a trailing momentum indicator.  It is based on the examination of the historical price progression during the last 64 years, 14 years, and the last 16 cycles of the four-year election cycle.  Below we have an excerpt from Almanac Smart’s S&P 500 2014 Almanac posted for subscribers.  As we see, typically April is a strong month posting a cumulative return of 98.5%.  During the last 64 years, the market’s cumulative annual return was 549.2% (Remember this is a cumulative average, not a compounded return).  During the last 14 years, April has remained a strong month, but has posted two thirds of the entire month’s cumulative return in the first 3 days. 

But this is not a typical year; it is the mid-term year of the four-year election cycle.  In the last 16 cycles, the mid-term’s April performance has been weak.  Yet the first 3 trading days have still come in on a positive note.  Unfortunately that means the remainder of the month has typically been negative and May has fared worse.  Historically, the weak season in stocks starts in May, but as we see during the mid-term year it has started in early April.  While the seasonal progression is only one indicator of many, it is valuable in that it has little correlation to other technical indicators.  It is correlated only to the historical price progression of the market.  And isn’t that a correlation worth watching.  Invest Smart.

Written and edited by Michael H Bond for Almanac Smart

Categories: Seasonal Perspectives