increase your profits systematically with recurring ... · the bull market since the 1980s...

Dimitri Speck: Profit From Seasonalities and Cycles

Increase Your Profits Systematically With Recurring Seasonalities and Cycles

Presenter: Dimitri Speck, Fund Manager, Financial Analyst and Trading System Developer


Disclaimer

This is only for your personal use. Investing involves a great deal of risk,

including the loss of all or a portion of your investment, as well as emotional

distress. Nothing contained herein should be construed as a warranty of

investment results or invitation to buy and sell any type of securities. All risks,

losses and costs associated with investing, including total loss of principal, are

your responsibility.

It is possible that the panelist may have a position in stocks or funds discussed

during this presentation or in subsequent correspondence with members of the

audience.


Wide Range of Seasonality and Cycles

Seasonal patterns occur in many markets:

• Indices

• Stocks

• Currencies

• Commodities

• Bonds

Many instruments have seasonal patterns

There are many periods and recurring events:

• Annual

• Intra-Month

• Intra-Week

• Intraday

• Recurring Events


Does Seasonality Work?

• "Sell in May" rule has been around at least since the 1930s

• It was also effective afterwards:


Investment Flows Lead to Summer Weakness

Source: Alan Newman


Halloween in UK

In UK the winter beats the whole year!


Sell in May and Go Away

The "Halloween effect" works in 11 of 11 countries; in 9 distinctly.


Academic Long-Term Study*

Up to 217 years, 4 asset classes, 68 markets:

*Guido Baltussen, Laurens Swinkels, Pim Van Vliet

Seasonality beats all other strategies!


Simple and Precise Analysis Through Charts

The averaging of the movements of past years shows a seasonal trend.

You can see the seasonal trend at a glance.

choice hotel

►


Caution: Construction Problems

The calculation is difficult for various reasons (e.g. because not every day is a trading day).

Most of the charts of other providers do not show details or are even not correct.

No day-specific information No real price information

Source: Moore Research Center Source: Bloomberg Intelligence


Seasonal Chart: Top Information at a Glance

Chart shows the seasonal trend of the Dow Jones over 25 years.

horizontal axis: months, vertical axis: price information (%)

• Weak in first months • Strong in April • Weak during summer • Autumn Rally


Seasonal Pattern: Autumn Rally Dow Jones


The US Dollar Index in The Course of The Year

• Weak at the end of the year

• Exactly at the turn of the year the seasonal trend turns

At the turn of the year, money flows out of the dollar area, only to return immediately. Reason: Tax deadline

US Dollar Index seasonal, 25 years


Microsoft often surprises positively in the 4th quarter ("Earning Surprises")

Microsoft in The Course of The Year

Microsoft seasonal, 20 years


Microsoft: Pattern Details


Soybean Futures in The Course of The Year

Low at the beginning of October

Soybeans futures, seasonal, 20 years


Real Estate Prices Over the Year

US Home Prices: Seasonal Divergence From the de-trended mean


Other Periods: Intra-Month

Chart depicts the intra-month average of the S&P 500.

Reason: payment flows (salaries, rents...).


The Power of The Turn-of-Month

Chart depicts the turn of the month effect of the S&P 500: In blue you see the return of an investment around the turn of a month (from 26th of each month until the 5th of next month), in red of the rest of the time since 1928.

7.6% p.a. in only 35% of the time (rest: -1.68%!)


The Turn-of-Month Effect Internationally

The "turn of the month" effect works even better in other countries than in the US


Other Periods: S&P 500 Intraweek • Tuesday strong Rises even during crashes!

• Friday weak


Gold Intraweek • Friday strong → Buy gold until Thursday!


Other Periods: S&P 500 Intraday

Chart depicts intraday average of the S&P 500 over 135 days

Don’ t sell in the first half hour!


Other Periods: 4-Year Cycle S&P 500 Election Years

Chart depicts seasonal trend of the S&P 500 only of the election years since 1952

September to October weak


Event Studies: Be Ahead of the Curve

Important events have a major impact on the markets:

• Elections

• Last Trading Days

• Holidays

• Reports (e.g. labor market report)

• Miscellaneous

But how do they affect your market? (Note: Not what most investors expect)


Event Study: S&P around FOMC Meetings

Chart shows +- 5 days before/after the FOMC announcement.

The 2 days before the announcement matter!


Event Study: S&P around US Elections

Chart shows +- 10 days before/after US presidential elections

Hope before the election leads to an increase in stock prices!


Practice: Average Not Every Year Follows a Seasonal Pattern

The Christmas rally is a fairly stable pattern

Over the last 70 years, the S&P 500 rose 53 times between December 14 and January 4. But: 17 times not!


Exceptional years are usually not representative!

Practice: Distribution

Infineon Align Technology


Seasonal patterns are based on actual reasons and can change due to changes in the reason itself (e.g. more harvesting in southern hemisphere).

The bull market since the 1980s destroyed many weaker seasonal patterns but not e.g. the year-end rally.

u

Practice: Stability of Seasonal Trends


Practice: Coincidence or Causal?

Seasonality delivers best results if there is a reason for a seasonal pattern that ensures its stability. There are many possible reasons for seasonal trends: ● weather (heating, harvesting etc.) ● window dressing (before reports etc.) ● taxes (before book keeping) ● emotions (during Christmas etc.) ● money flows (rate payout etc.) ● for individual stocks: earning surprises, trade fairs, holiday season…


5 Ways of Seasonal Trading:

• Directly: Seasonal patterns can be traded directly.

• Timing: Seasonal patterns can be used for timing e.g. stocks in November instead of the beginning of January or intraday at the best moment.

• Filter: Seasonal patterns can be used for filtering and exposure; e.g. reduce stock exposure while seasonality is negative.

• Seasonality as additional input.

• Selection: E.g. Stock rolling (Microsoft in October…)


Seasonality

Dollar

Profits

Trend

Inflation

Oil

DAX Trading System

Seasonality as additional input

• Use seasonality as one of your decision input factors.

• It is easy to implement

Source: Gebert

Interest rates


Selection: Novo Nordisk in The Course of The Year What’s about Novo Nordisk in February?...


Selection: Adidas in The Course of The Year

... and Adidas in March/April?


Stock Rolling

This scheme shows you the idea of rolling from one stock to another:


Screening

Screen thousands of instruments on the best upcoming seasonal investment opportunities


To Make You Smile: Separation Rates

Source: www.beraterteam.info

Be careful with jokes on April 1st !

www.seasonax.com

• Free test of popular instruments Free bi-weekly research report • Full access to 27.000+ instruments: Voucher ifta-50 (small letters) now one time 50% off

increase your profits systematically with recurring ... · the bull market since the 1980s...

Documents