Seasonality Service "Trader's" Strategy

The following strategy is laid out for those who like to move in and out of positions on a frequent basis.  Of course, our tables show opportunities to trade on an even more frequent basis, but we've tried to blend statistical significance, risk, and commissions to produce a reasonably sane strategy.  

The strategy is based on trends derived from data going back to 1993.  As we've pointed out before, some of our best test results have been gotten by mirroring only the best indicators from just one year ago, not those compiled over several years, so we won't claim this is the "optimal" seasonal strategy.  Time will tell.

We'll reserve the right to change the following rules, as long as the change is not made retrospectively.  The test of this strategy begins Oct 2003.

1)  January...own the cheapest 4% of stocks (hold until the end of February).

2)   March...load up on oil stocks (industries 10-11)..

3)  April 1-15...own the 10% of stocks that have the lowest "close-low" differential on the last trading day of March.

4)  April 16-30...own the 4% of stocks with the highest standard deviation.

5)  May 1-31...buy the cheapest 4% of stocks.

6)  June 1- July 15...buy the 10% of stocks with the greatest yearlong gains.

7)  July 16 - 30...take a vacation (no buying).

8)  Aug 1-Sep 30...buy the 10% of stocks with highest 12 month gains.

9)  Oct 1-31...buy the 4% of stocks with greatest losses in September.

10)  Nov 1-30...buy the 4% of stocks with the lowest "mov_ave100"

11)  Dec 1-30...buy the 10% of stocks that trade highest above their most prominent resistance levels ("resist1"), selling just prior to the last session of the month.

The main points are to catch the January effect, the tendency of oils to gain in March, the two weeks of strong gains following April 15, the tendency for cheap stocks to gain in May, the tendency of winners to continue winning from June through September, the tendency of losers to reverse course from Oct 15 to December 1, and the tendency of winners to reassert themselves in December.  So, it's not imperative for real-world investors (as opposed to guys who make hypothetical portfolios) to follow our rules in February, the first half of April, or the beginning of October.  We, however, will abide by the rules above.

Another trading-oriented strategy would be to look at our daily data to try to get some sense as to when the above mentioned trends start catching steam, if at all, and then pile on.  After all, most of these trends don't have precisely defined starting and ending dates, and they can be entirely absent in given years.

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