Keystone's February Seasonality

Before taking a look at the seasonality factors for February trading, a quick look back at January is in order since it was the best January since 1997.  The January Barometer says that however the market does in January, bullish or bearish, so goes the year. This adage is correct about two-thirds of the time. Also, if the markets are up the first day of January, which they were, the markets typically finish up 80% of the time. Thus, we were up the first day and also for the month so this predicts bullish markets for 2013. But, not so fast, January 2011 was up and markets experienced the August 2011 crash only to recover to a flat line, barely, by pennies.

Seasonality factors are like a breeze in the background, gently nudging markets one way or another. Simply knowing the seasonality factors is another edge that you have on another trader.  2013 is the first year of the Presidential Cycle. February is the worst month of the year for small caps during the first year of the Presidential Cycle. The only three months of the year that average out to negative returns, and are obviously the most bearish months, are February, May and September. So the bears usually growl in February creating a -0.3% average market move lower. The largest gains in the market are made from November thru April, flat returns typically occur from May thru October. Since the 1950's, the returns for the quarters are Q1=2.1%, Q2=1.8%, Q3=0.6% and Q4=4.3%. We are obviously in Q1 currently (Jan-Feb-Mar).

Markets are typically buoyant the two days in front of a three-day holiday weekend.  February 18th is President's Day and the markets are closed.  Thus, 2/14/13 and 2/15/13 would be expected to be bullish. Valentine's Day (2/14/13) may be a good luck day for lovers but not for markets since it is typically a down day about 60% of the time. The Friday Jobs Report occurred quickly this month, on 2/1/13. For OpEx week, Monday (2/11/13) tends to be bullish, and markets tend to be bullish from Tuesday into Wednesday, 2/12/13 into 2/13/13.  The last two days of February markets are typically down -0.6%, and February performs the worst out of all months for the last two days of the month, so a weak finish to the month may be on tap. Congress is in session this month except for the week of 2/18/13 (President's Day week) so markets should favor the bear side.  The dollar tends to be stronger from January thru April as compared to the rest of the year. The commodities, copper, gold, oil and equities markets move opposite the dollar.

The Superbowl Predictor is if an original NFC team wins, markets will be bullish.  If an original AFC team wins, the markets will be bearish.  Both the Baltimore Ravens and San Francisco 49er's are old NFC teams so the bulls win no matter what. However, in keeping with the theme of the indicator, the Ravens won, an AFC team, thus markets should be bearish this year. Funny thing, the Giants (NFC) won against the Pats (AFC) in the 2008 Superbowl.  Do you remember what happened in 2008? Yes, an epic market crash.

Shipbuilders typically move up in February and then UPS and FDX follow along. The Baltic Dry Index (BDI) has collapsed so perhaps a move up due to a washout and also seasonality will be in order. Typically, February is a good month to buy cyclicals like steel, chemicals, etc...  A low in oil price tends to occur in late February. Companies such as Hershey's, HSY, tend to top around Valentine's Day 2/14/13.  Tech is strongest in Q4 and traders typically exit the technology sector the second week of February. Traders not exiting technology in the second week then tend to exit between OpEx and the end of the month. At any rate, the technology joy in Oct-Nov-Dec typically deflates in February. A new moon occurs on 2/10/13 so markets should exhibit weakness from 2/7/13 through 2/11/3.  A full moon occurs on 2/25/13 so markets should exhibit strength from 2/21/13 through 2/26/13. Jobs Friday was a big up day so that typically hints that the month should be positive. Generally, seasonality-wise, February is typically one of the few bear-friendly months.