The month of April is the best month for the S&P 500 based on percentage change for the month, with an average monthly percent change of +2.09% since 1993. The month of April is second only to the month of December when it comes to average percent positives since 1993 with 71.43% of the April closings positive. Similar outcomes are also the case for the iShares Russell 2000 Value Fund (IWN), a 2k value index, the SPDR Dow Jones Industrial Average ETF (ARCA:DIA), the SPDR MidCap Trust Series I ETF (MDY), and the iShares Russell 2000 Index (ARCA:IWM) as you can see from the chart below:
The only rule when one follows seasonality blindly is to buy the underlying instrument at 9:30am the first day of the trading month and sell it at the close the last day of trading. Now that we have 2x and 3x ETFs it makes this strategy even more worthwhile when it works. Using technicals can also help if you are able to pinpoint a safe entry point as opposed to buying an index blindly up 5 days in a row—hypothetically. You can also get a little more sophisticated with sites like marketmemory that show you the most dominant seasonal pattern for the last few years. As you can see in the chart below, since 2009 it has been best to buy the SPDR S&P 500 Trust (ARCA:SPY) on the 10th trading day of the month.
The Dow Jones over the last 5 years has shown a similar pattern to the SPY, some downside action at the beginning of the month and a bottom at around the 10th day of the month. There are many different ways to skin this cat: one can allocate a certain amount on the first day of the month, and allocate more based on the most dominant pattern of the last 5 years which is to buy on the 10th trading day.
In our next post we will look at some of the stocks within the S&P 500 which have historically shown strong performance in the month of April.
Disclosure: Zor Capital LLC is a New York based investment management firm, founded in 2011. Our goal is superior performance, with preservation of capital as our number one priority. Zor Capital manages separate accounts (both taxable and retirement) for accredited investors and institutions. This structure gives clients access to a hedge fund like strategy while maintaining 100% control of their accounts. Managed Assets
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