Keystone's March Seasonality

March is typically an up month (based on many decades data) with the markets gaining +0.8%. Interestingly, however, March has trended lower for most years over the last decade.  In general, the largest gains in the stock market are made from November thru April with flat returns May thru October. The traders aware of this seasonality entered the markets long at the mid-November bottom and have been joyfully rewarded. The greatest market gains occur in Q4, with Q1 (Jan-Feb-Mar) next at 2.1% and Q2 after that with an average 1.8% return. Obviously, Q1 is on its way to blow out the average returns, unless March plans on ushering in ill winds. February is typically a down month where traders look for a dip to enter long and hold through April ahead of the 'sell in May and go away' period. The dip buyers are alive and well as shown by the wild market action last week.

The dollar is typically strong from January into April. The expected dollar seasonality is in place with the dollar experiencing a substantial move higher over the last month and $USD is above 82. This is causing selling in the copper, oil and commodities markets. Up Friday's and up Monday's for markets typically indicate bullish markets while down Friday's and down Monday's typically indicate bearish markets. All Monday's are down days this year thus far with Friday's mixed. The Monthly Jobs Report is Friday, 3/8/13. Keystone's Indicator on the Other Signals page shows how the market direction on jobs day typically dictates the direction for the month. Markets typically pull back three times a year with 5% sell offs which is healthy behavior for a robust bull market.  For 2013, however, and the last year in general, the markets continue to inflate non-stop on the global monetary easing and race to debase. However, 'trees do not grow to the sky', as the old Wall Street adage says.

The markets tend to do poorly when Congress is in session, and do well when Congress is out of session.  What a sad commentary it is, but it is what it is. Thus, for March, the Congress, and much of the political drama in general, should create a market negative. On the first day of any month, new money typically rolls into markets and helps boost the indexes as shown by Friday's recovery move.

The new moon is 3/11/13 and markets are typically weak moving through the new moon. The full moon occurs on 3/27/13 and markets are typically buoyant through the full moon.  The BOE and ECB Rate Decisions occur on Thursday, 3/7/13. During OpEx week, markets tend to be buoyant on Monday, 3/11/13, which conflicts with the new moon. Also markets tend to be buoyant from a Tuesday low into a Wednesday high, 3/12/13 into 3/13/13, thus, if patient, sometimes a one-day long trade can be placed Tuesday. The FOMC meeting is 3/19/13 and 3/20/13 with the rate decision, forecasts, and a press conference occurring the second day.  This date is significant since FOMC day in March typically results in a market up day 76% of the time. This year, 3/20/13 is also the first day of spring, providing more reason for bulls to celebrate.  OpEx Friday is 3/15/13 and markets tend to move opposite on Monday, 3/18/13, as compared to Friday's action. March OpEx week, 3/11/13 thru 3/15/13, is typically up 85% of the time.  Thus, also considering the new moon, perhaps some weakness on 3/11/13 or 3/12/13 will lead to a stronger week moving into Friday 3/15/13.  If the market bears want to push the broad indexes lower, they better show up to play for the week of 3/4/13, starting tomorrow, otherwise, the bulls may run higher into the back half of March. This week is a critical trading week ahead.

The end of the month, EOM, occurs on Thursday, 3/28/13, (markets are closed Friday, 3/29/13), which will also close out Q1; EOQ1 (end of the first quarter). This month provides 20 days of trading, with one market holiday, Good Friday on 3/29/13 where the markets are closed.  St. Patrick's Day is on Sunday, 3/17/13, a day when everyone is Irish. Easter Sunday is 3/31/13, a bit early this year instead of April. Markets are up about two-thirds of the time during Good Friday week which is 3/25/13 thru 3/28/13. Window dressing plays a key role this month, since it is the end of Q1 so the markets are setting up to be very favorable to the bulls during the last week of this month. The week of 3/11/13 and week of 3/25/13 are favoring the bulls. Everything is going the bulls way these days, but, for how long?

March typically plays the role of a correction month where usually the month sells off where many traders then enter long at a market bottom to ride the last pop up in March-April before traders 'sell and go away in May'. There is typically a cell phone conference in March so technology and telecom stocks may receive positive attention.  Tech is always strongest in Q4, and then peters out in the winter and spring. Tech and AAPL were weak last week.  Thus, traders are likely to take profits in technology moving forward. Summer time is slow for technology and traders are sitting on a bundle of gains now that most do not want to lose.

The Hurricane Season will begin in June and runs through November. March is typically a great month to do your homework on hurricane plays, power outage plays, oil and natty plays, since the hurricane watch coming in a couple months will greatly effect trading in these sectors moving forward.  Tax refund checks start to trickle into lucky hands during March and April and with on-line filings growing, the time frame is shortened and favors March even more.  Thus, this money windfall is typically spent which helps the economy, albeit in a minor way. Gasoline costs typically peak between March and May as the refineries switch from winter to summer grades and undergo maintenance. With the potential global slowdown on tap, which would send prices lower,  and the Midlde East drama ongoing, which would send prices higher, the oil and gasoline markets can only be taken one day at a time.  The last thing motorists need is further gasoline price buoyancy but this is the time of year when it occurs. It is interesting to see what affect the higher gasoline costs, now at or approaching $4 per gallon in the U.S., will have on retail sales as well as consumer sentiment moving forward.

Remember, seasonality factors simply provide a gentle background current for trading, and are never used as a sole basis for trading. Just as it is easier to swim with the current, not against it, it is easier and more advantageous from a risk-reward perspective, to trade with the seasonality current rather than against it.  As in swimming, however, sometimes you must swim against the current. Price action always trumps seasonality factors. Bears must make a move this week otherwise, the seasonality factors point to happy bulls and perhaps SPX 1550-1580. The Continuing Resolution deadline is 3/27/13 where the funding for the government must be approved, otherwise, a shutdown will occur and this is far more serious than the sequester drama; this deadline now only 23 days away.