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, where May dropped from start to finish. June mounted a comeback regaining about two-thirds of the May loss.

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 month, and new quarter, Q3, begins today, Monday, 7/2/12, with a full moon on tap tomorrow. Markets are typically bouyant in front of the full moon. Markets close early on Tuesday, 7/3/12, and are closed on 7/4/12 for the July 4th Independence Day holiday. The Monthly Jobs Report is Friday, 7/6/12. The last three job reports are a debacle. There are only five reports remaining in front of the U.S. presidential elections. Consumer Sentiment is important on Friday the 13th, 7/13/12. Congress is in session for the month (except for a few days with the July 4th holiday) so this is a market negative. Housing Starts are 7/18/12, a key market metric.  Markets are typically weak in front of the new moon which occurs Thursday, 7/19/12. For OpEx week, the week of 7/16/12, Monday, would be expected to be buoyant for markets, then the time period from a low on Tuesday into a Wednesday high woud also be expected to be bouyant. Markets will tend to move the opposite direction on Monday, 7/23/12, as compared to the movement on OpEx day on Friday, 7/20/12. Consumer Sentiment is released on Friday, 7/27/12.  A Bradley turn date occurs on 7/28/12, a major turn date, thus, look for a market trend change between Friday, 7/20/12, and Friday, 8/3/12. The Fed meeting is 7/31/12 so July is relatively free from the FOMC drama until the back end of the month. The EOM is Tuesday, 7/31/12.

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. The oil and natty markets will take wild swings as the storms form.

Typically, the VIX, volatility, bottoms in early July, the May thru early July time frame, and considering the recent recovery move in markets during June, 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. Interestingly, July and August typically outperform in elections years.

Oil drillers typically run in August so buying them in July tends to work out well. Oil tends to be strong from late June into early July. Beverages, soda and beer stocks tend to peak in July since folks do not drink as much in the winter months, so consider this for beverage stocks.