Keystone's March Seasonality for Trading the Markets

March is typically an up month (based on many decades data) with the markets gaining +0.8%. Interestingly, however, March has trended lower for the majority of years since 2000. In general, the largest gains in the stock market are made from November thru April with flat returns May thru October. 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. 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. This year February was a robust bullish month with new all-time highs now printing on the indexes.

The dollar is typically strong from January into April. The expected dollar seasonality results in a flat dollar this year so perhaps some upward buoyancy would be expected moving forward for the next month or two. USD is at 80.14. The flat to weaker dollar has fueled a big recovery move in commodities over the last month. A stronger dollar would cause the commodity rally to stall and reverse. 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. Monday's are down days in recent weeks with Friday's mixed. Interestingly, the latest trend is for down Monday's and up Tuesday's and this played out exactly this week for 3/3/14 and 3/4/14.

The Monthly Jobs Report is Friday, 3/7/14. 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 but the stock market simply continues higher month after month without correcting fueled by the Fed and BOJ easy money. The central banker intervention distorts or nullifies many seasonal relationships. 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 true. Thus, for March, the Congress, and much of the political drama in general, should create a market negative. From the last day of the month through the first four days of the new month, equities tend to be bullish as new money enters. March follows this trend so far. Today, 3/6/14, ends the first four days of the new month.

The new moon was 3/1/14 and markets are typically weak moving through the new moon, which occurred. The full moon occurs on 3/16/14 and markets are typically buoyant through the full moon so markets may rally from 3/14/14 through 3/17/14. The BOE and ECB Rate Decisions occur on Thursday, 3/6/14. During OpEx week, markets tend to be buoyant on Monday, 3/17/14, which agrees with the full moon seasonality. Also markets tend to be buoyant from a Tuesday low into a Wednesday high during OpEx; 3/18/14 into 3/19/14, thus, a one-day long trade can typically be placed Tuesday.

The FOMC meeting is 3/18/14 and 3/19/14 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. Spring arrives 3/20/14 which will place traders in a happy mood. OpEx Friday is 3/21/14 and markets tend to move opposite on Monday, 3/24/14, as compared to Friday's direction. March OpEx week, 3/17/14 through 3/21/14, is typically up 85% of the time. Thus, also considering the full moon and OpEx buoyancy, the period from 3/14/14 through 3/21.14 appears very favorable for bulls. OpEx week usually occurs earlier each year, more towards the mid-month, so if the week of 3/10/14 is strongly bullish, this may take away from the expected bullishness during the week of 3/17/14.

The end of the month, EOM, occurs on Monday, 3/31/14, which will also close out Q1; EOQ1 (end of the first quarter). Window dressing will occur to end the quarter so bullishness may be expected 3/25/14 into the end of the month. A new moon is 3/30/14 so market weakness would be anticipated from 3/21/14 into 3/24/14. St. Patrick's Day is Monday, 3/17/14, a day when everyone is Irish.

March typically plays the role of a correction month. 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 remains surprisingly strong. Traders typically take profits in technology this time of year. Summer time is a slow period for technology.

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. Perhaps the refunds already helped fuel February gains. 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 Ukraine, Venezuela and Middle 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 the 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. Using the above information to paint a mosaic for March, market buoyancy occurs from 3/3/14 into 3/6/14. Then perhaps weakness from 3/7/14 to 3/13/14. Then perhaps bullishness from 3/14/14 to 3/21/14. Then weakness from 3/21/14 into 3/24/14. Then some market buoyancy due to window dressing during the remaining days of the month. If March is up strongly, the last few days should finish weak. If March is a weak month, the last few days will be fueled by window dressing and should finish stronger.