Day of Month Seasonality for December
A topic recently on me noggin has been day-of-month seasonality (read more, more, and more). Using a simple walk-forward test to minimize hindsight bias, I showed that trading the days of the month that have been strong historically has consistently led to much stronger returns in the future. That’s as true today as it was in 1950.
The “strategy” has been uber effective in the two months since I shared it, with the S&P 500 returning 0.15% on qualifying days, vs just -0.29% on non-qualifying days.
Below is the DOM seasonality calendar for next month, broken out by quartiles (read why), with quartile 1 indicating the strongest days and quartile 4 the weakest.
I’ve made just two exceptions: 12/12, the last day of the FRB meet, and 12/24, the day before Christmas.
As I’ve shown previously, Fed days have been consistently bullish events for the last two decades, so even though 12/12 was already a quartile 2 day, I’ve highlighted it dark green. And the day before exchange holidays tends to be slightly bullish, so even though 12/24 was originally a quartile 3 day, I’ve left it a question mark.
Note that 12/31 is also the day before an exchange holiday, but the last day of the year is historically weak, so I’ve let it stand as a quartile 3 day.
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