As someone that has previously expressed interest in the Stock Trader’s Almanac and my digital service, I am emailing you today to let you know that our Seasonal MACD Sell Signal could occur soon. When the signal does trigger it will mark the end of the “Best Six Months” for DJIA and S&P 500. Historically DJIA has averaged gains of 8.8% during the Best Months and a loss of 0.5% during the “Worst Six Months.”
This year, the Best Six Months (November through April) are positive, but below average. Persistent inflation concerns have caused the Fed to aggressively raise interest rates. Tighter monetary policy is weighing on the economy. Russia’s invasion of Ukraine continues to elevate geopolitical tensions.
To be clear, we are NOT issuing the signal at this time. We are only alerting you so you do not miss it. April is the last month of our “Best Six Months” of the year. Our technical MACD sell signal can come as early as April 3 (the first trading day of the month this year), but in recent years has not arrived until sometime in May.
The “Worst Six Months” (AKA “Sell in May”) have also been shaky in Pre-election years. The long-term track record of our Seasonal Switching Strategy, which is based upon the “Best Six Months” in conjunction with our MACD Technical Buy and Sell Signal Triggers, has a solid track record of outperformance with potentially less risk compared to a buy and hold approach. Since 1950, DJIA’s average annual gain has been 8.4%. Over the same period, DJIA has lost an average 0.5% during the “Worst Six Months,” May through October, and gained an average 8.8% during the “Best Six Months,” November through April.
Detractors are quick to point out that there have been positive “bad” months and negative “good” months. This is absolutely true as there is no trading or investment strategy that works 100% of the time (even the best will report a trading loss every once and a while). If the current “good” months period does finish with a loss, it will be just the 12 loss in 73 years. In pre-election years, the best performing year of the four-year cycle (page 132, STA23), there have been selloffs. The “Worst Months” in 1987 hosted the largest decline. Each of the last 18 pre-election-year “Worst Months” can be seen in the above table. DJIA and S&P 500 Worst Six Months are May through the end of October. NASDAQ’s “Worst Four Months” are June through October.
Considering the paltry historical average gains, even in pre-election years, during the “Worst Months” a cautious approach is worth consideration. Stock Trader’s Almanac Investor can guide your through the upcoming “Worst Months.”
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