Keystone's August Seasonality Factors for Trading the Markets

August is typically an up month, up about 1.3% on average, similar to the July average expectation.  August is followed by the weak months of September and October. The largest gains for any year are typically made between November and April so we remain in the summer lull period currently. On a quarterly basis, Q3 (July-August-September), is the under performing period of the year only resulting in an average gain of 0.6% for the three month stretch. The big up in July, however, goes contrary to this seasonality factor unless of course, if markets have a worse than normal September and October.

August is a lengthy month of trading. Labor Day is 9/2/13 which has served as an inflection point for markets the last few years. This year, Congress returns after Labor 
Day and will have to solve the U.S. fiscal problems in a short four weeks time. The fourth quarter, Q4, is always best for tech so a potential tech long list can be developed during August and September. Biotech is also strong in Q4 so the same idea applies. As hurricane season escalates, consider plays such as LOW, HD, GNRG or URI but stocks are all at lofty heights these days. Oil, natty and energy markets are not the hurricane plays of the past either now that shale technology diversifies the supply. Oil, suppliers, home improvement and insurers all get a boost from the bad weather. Typically, oil likes to rally from August into October. Retail receives attention due to back-to-school sales. The back-to-school sales enthusiasm, or lack thereof, can be extrapolated forward to project upcoming Christmas sales. Some traders go long the retail sector from Labor Day into mid October as a regular trade each year, so this would set up later in the month. Retail has already enjoyed a long, obscene run higher so this seasonality may not work out as expected this year.

Gold typically bottoms in August.  August thru October is typically up for gold. September is Indian marriage season and India consumes about one-third of the world's gold supply. If the monsoon season goes well and the agriculture projections are in great shape, this will boost gold sales in the fall.  Congress is in recess during August so this is a positive for markets, however, markets are typically weak when Congress is in session but over the last month equities have done nothing except go higher. Volatility, the VIX, tends to bottom in August which then leads to VIX upside moving forward. There are no Bradley turn dates until October.

Markets run strongly higher the first two days of August with the SPX breaking above 1700 for the first time in history.  Stocks are typically bullish from the last day of the month through the first four days of the new month as new money is put to work (see the Other Market Signals page). A new moon occurs on Tuesday, 8/6/13 and markets are typically weak into a new moon. Ramadan ends on Wednesday, 8/7/13, so Middle East and Northern Africa violence may increase. OpEx Monday is 8/12/13 which is typically an up day. Markets are usually bullish from OpEx Tuesday into Wednesday, 8/13/13 to 8/14/13. OpEx Friday is typically an up day. Housing Starts are Friday, 8/16/13. Markets will tend to move in the opposite direction on Monday, 8/19/13, as compared to Friday OpEx.  A full moon occurs on 8/20/13 and markets are typically bullish moving through the full moon. The FOMC Minutes are released on Wednesday, 8/21/13.  Consumer Confidence is Tuesday, 8/27/13, and GDP is released on 8/29/13.  

Jackson Hole begins on Thursday, 8/29/13, and ends on Saturday, 8/31/13.  All eyes and ears will be watching and listening to Fed Member Yellen since she may be the new Fed Chairman replacing Bernanke in mid-January.  The EOM is Friday, 8/30/13.  The U.S. markets are closed on Monday, 9/2/13, in Observance of Labor Day so Thursday and Friday, 8/29/13 and 8/30/13, will be expected to be bullish in front of the 3-day holiday weekend.  U.S. markets will reopen on Tuesday, 9/3/13, for trading. September is the worst month of the year for stocks but we can review its seasonality while grilling hamburgers, and eating apple pie of course, on Labor Day.