Day of Month Seasonality for March

28Feb13

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.

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.

20130228.01

I made just two exceptions: 03/20, the last day of the FRB meet, and 03/28, the day before Good Friday.

As I’ve shown previously, Fed days have been consistently bullish events for the last two decades, so even though 03/20 was a quartile 4 day, I’ve highlighted it dark green. And the day before exchange holidays tends to be slightly bullish, so even though 03/28 was originally a quartile 3 day, I’ve left it a question mark.

. . . . .

Real-time results since I began sharing the calendar in October are mostly inline with the historical test, with the S&P 500 averaging 0.09% (24% annualized) on the best half of days versus 0.01% (3% annualized) on the worst half.

Quartile 4 days (the worst of days) have been particularly bad, with an average return of -0.32%. Quartile 1 days (which should be the best of days) have so far been middling, with an average return of just 0.02%.

As I stressed when I introduced the concept, day-of-month seasonality never justifies a trade all by itself, but I do think it deserves to be one of many tools in the trader’s toolbox.

Happy Trading,
ms

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2 Responses to “Day of Month Seasonality for March”


  1. 1 Friday links: inaccurate market calls - Abnormal Returns | Abnormal Returns
  2. 2 What I’m Reading This Weekend | System Trading with Woodshedder

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