March has churned out gains of about .7% per year since 1994.  The second half of the month accounts for most of those gains, so the first half of the month extends the doldrums of late February.

The best long and short predictors involve industry groups, so we'll begin with a look at industry trends.

Oils have performed outrageously well in the month...far better than our second best predictor of gains.  The average monthlong gain for the group since 1993 is about 8%!  The gains are particularly significant after risk-adjustment.  The group gained nicely in every year from 1996 through 2001. 2006 was relatively strong as well.  The gains have occurred in both halves of the month, and seem to segue into gains in the chemicals and raw materials group in the first half of April. 

To push the gains in oils even further, try selecting those that have taken a whipping over the last few months or year.  Choosing the more volatile oil stocks can also work to your benefit.

References to this March oil effect are nonexistent on the internet, as far as we can see.  Nevertheless, the statistical significance is quite strong.  Others have noted, however, that demand for gasoline has a seasonal tendency to bottom toward late February...winter forces lower consumption on many Americans.  This, of course, coincides with the cheapest seasonal prices for gasoline.  March gains in oils may be in anticipation of higher gasoline prices in the months ahead. 

Retail stocks perform well in both halves, extending February's gains in the sector.

Biotechs and medical technology stocks top our list of weak performers, actually losing about 1.5% per March.  The losses were relatively large in 1994, 96, 97, and 1999-2001. The trend reversed in 2003, when biotechs performed quite strongly.  The trend toward losses in this group continues until the end of April. 

Semiconductors and software stocks have essentially gone nowhere in the period, with losses in the second half of the month.  Looking at lower tech stocks, food/agro companies have suffered.  

One generally doesn't see a positive broad market accompanied by losses in semiconductors, biotechs, and other volatile stocks, but that's what happens in March.  Look for a couple prominent talking heads to ask, "has the market rotated away from tech?" sometime during the month

Further down the list, long or mid-term losses (1 year or 3 month) seem to predict gains in the month, alongside cheaply-priced stocks.  Stocks of high capitalization come back from a poor performance in February.

Another group that performs well is stocks that have performed well in the month on a historical basis.  Not surprisingly, though, a lot of these stocks are oil stocks which made nice successive gains from 1996-2001...the indicator disappears from the tables if we remove oil stocks.  In any case, the strategy of going with oils is quite a bit more potent than going with stocks with strong March performances.  However, our data shows that shorts might also profit by selling stocks that have been historically weak during the period...obviously, such stocks don't include oils.  For fans of this approach to seasonality, we offer the following table of historically strong and weak March stocks.

"Industry momentum" doesn't seem to play much of a role in buy or sell decisions in March...i.e. going with stocks in industries that have prospered over, say, the last three months won't give you any particular advantage or disadvantage.

For shorts, large gains in February predict losses.

Generally speaking, predictors for gains and losses in the first and second halves of the month are similar to those for the full month, so we won't launch into a long discussion of the first and second halves.  It would be worthwhile to avoid regional banks in the first half of the month, and tech stocks in the second half.

Looking at data from the larger-cap, less diverse S&P 500 index going back to 1986, oils and retails continue to show strength, but simply going with February's losers has been a stronger strategy.

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