SPY Seasonality

SPY Seasonality

SPY seasonality trading can be very profitable if done correctly. We like SPY seasonality and have made plenty of SPY seasonality trading. In this article, we look at several SPY seasonality patterns.

But first, what is a SPY seasonality?

What is SPY seasonality?

SPY seasonality refers to patterns and effects that are based on dates, weekdays, months, holidays, etc. All these have one thing in common: they are based on seasonality. It’s based on periodic but recurring patterns based on history.

What is the best SPY seasonality?

The best SPY seasonality is the turn-of-the-month effect. Its trading rules are simple: you buy SPY on the last fifth trading day of the month and sell at the close of the third trading day of the new month.

The chart below shows the equity curve:

As you can see, the performance is pretty linear. Since SPY’s inception in 1993, this SPY seasonality has returned 7.4% annually compared to 10.1% for buy-and-hold. We need to compare this to the time invested in the market, which for the strategy is only 33%.

What is the seasonality of the S&P 500 in 2024?

The best seasonality of the S&P 500 in 2024 is the one that has performed the best in the past. Based on our backtest and statistics, it’s the turn-of-the-month strategy.

What are the best months for the S&P 500 historically?

The best months for the S&P 500 are November, April, December, and October, in that order.

We backtested all months for your convenience:

The first column shows the month, and the second shows the average % gains for that month.

How to find SPY seasonality

You find seasonality by backtesting. Backtesting is the only tool you have to find data-driven seasonalities based on statistics and facts – not random anecdotal evidence.

Advantages of SPY seasonality

The advantages of SPY seasonality are that they are different than traditional strategies like indicators, technical analysis, etc. SPY seasonality offers diversification to your portfolio of trading strategies.

Disadvantage of SPY seasonality

The disadvantage of SPY seasonality is that trading patterns and effects tend to disappear after they become too known or evident.

Summary

Seasonal patterns in the stock market reveal intriguing insights into the future performance of trading stocks. Analyzing past performance through seasonal charts can provide investors with valuable information about seasonal tendencies and average returns. However, it’s essential to recognize that historical data may not necessarily reflect future outcomes. Each particular year may exhibit unique characteristics, and thus, investors should proceed with caution and conduct thorough research before making investment decisions.

Academic research on seasonal tendencies in the stock market has shown that certain time periods tend to produce positive returns more consistently than others. However, it’s crucial to remember that investing carries inherent risks, and past success does not guarantee future gains. Therefore, individuals should approach seasonal trading with awareness of their own risk tolerance and consider seeking professional investment advice.

While seasonal charts may illustrate historical trends, they should not be used as the sole basis for investment decisions. Consulting with a financial advisor or tax expert can provide additional insights tailored to individual circumstances. Ultimately, understanding seasonal patterns in the stock market can be a valuable tool for investors, but it should be used in conjunction with other research and analysis to make informed choices.

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