Keystone's July Seasonality

In general, the broad markets experience the best gains from November thru April, and flat or down returns May thru October.  Hence, the Wall Street adage, “Sell in May and go away.”  This certainly worked this year, at least until this week came along.

July is typically up about 1.4% on average, a countertrend month within that May to October weak time period. July is typically a bad month for OTC trading and a bad month for the RUT, so keep this in mind while trading small caps.

The Fed meeting is not until 8/9/11 so July is free from the FOMC drama. The debt limit talks in Congress will heat up especially during the second half of July as the clowns play the political games.

Mid-July is a targeted sell off area as per the Eclipse Sell-Off Technique. This technique targets mid-May and mid-July in this cycle, and you saw what happened in May.  Since the markets did absorb a lot of this negative energy in May into June, sometimes that lessens the impact of the proposed second sell off target area in mid-July.  This is not something to directly trade off of but you must be aware of it since it is an item that provides the background currents gently pushing the broad markets one way or the other.

The recent Bradley turn window was 6/22/11 which obviously resulted in this week’s market melt-up. A major Bradley turn area occurs at month-end, 7/29/11 and 7/30/11, thus, a major market trend change window would occur between 7/22/11 and 8/8/11.  Interestingly, this window jives with the eclipse technique in the third week of July area. The back half of July should be quite entertaining since this is when the debt limit drama will accelerate.

Hurricane watches will increase as the summer proceeds so oil trading will continue to be volatile.  Watch HD and LOW behavior this month since the cane’s have folks running to stores in search of plywood and generators.

Typically, the VIX, volatility, bottoms in early July, the May thru early July time frame, and considering the run up in the markets (volatility down) this week, a potential trade is buying into volatility as the next couple weeks move forward.  This would serve as a nice hedge anyways for any steadfast long players.

There is typically a summer rally each year and July is a proper time frame to consider.  The summer rally is typically a week or two event.  Tech tends to bottom in July. There is usually a tech conference and a biotech conference this month so the individual stocks in these sectors require close watching.

Oil drillers typically run in August so buying them in July tends to work out well. Beverages, soda and beer stocks tend to peak in July since folks do not drink as much in the winter months.