S&P 500 FUTURES: TRADING BY THE ALMANAC

MrTopStep.com

A long time ago I decided that the best way was to go right to the source, and that’s what I did when I called Jeff. At first (like most people) he was a little hesitant. I am sure part of it was that he didn't know me, but after I started talking about being one of his followers for the last 20 years (Jeff, that would make you about 15 years old), he started to warm up. I told him how the Pit Bull opened my eyes to historical data and stats and that I locked right on to the Stock Trader’s Almanac. While no service is perfect, this year the Trader’s Almanac has been super accurate. From the best 6 months for stocks and the election stats to the January Effect, everything has worked. Sure, I can open my almanac, but it may be a good time for you to take a serious look at it yourself.

Worst 6 Months
The best 6 months for the stock market go from November to April and the worst 6 months for stocks are May to October. While April is still the best month for the Dow (average gain of 2% since 1950) and the second best month for the S&P and third best month for the NASDAQ, it is also prone to weakness after the mid-month tax deadline.

April Expiration
The April expiration day has the Dow up 13 of the last 16 occasions, up 1.2% in 2007, up 1.8% in 2008.

May / June Disaster
Between 1965 and 1984 the S&P was down 15 of 20 Mays, but between 1985 and 1997 May was the best month with 13 straight gains with an average of 3.3% pre- month, and it has been up 7 and down 7 since.

Summer Rally
The summer rally in most cases is the weakest rally of all four seasons. The week after the June triple witching day, the Dow has been down 20 of the last 22 with a recent record for the S&P of up 10/ down 7 with an average loss of 0.4%.

When the Train Stops
With the central bank printing presses going 24-7, it’s been an impossible to sell the S&P, but as we come into the end of April and into May we think that could start to change. Let’s face it, people take time off over the summer, they trade less and they pull money out of their accounts to go on vacations. As we get closer to that time, MrTopStep believes there is potential for a real pullback in the stock market. This doesn't mean we are looking for a large correction or a crash, it means “pullback time.” Our idea is to take some profits if you’re long and look at some type of downside put spreads and then start looking for the markets to firm up going into November and the best 6 months for stocks.

Our view: Some spooky stuff could be about to start up in North Korea over the next few days as they prepare to test some new missiles. It’s highly unlikely that the North will use any nukes, but the question is will the U.S. or Japan shoot them down? With the S&P up so much, there is some downside risk there. As for today, we lean to selling the early rally and buying weakness. The Korean stuff also could be part of the slowdown over the last few days. As always, keep an eye on the 10-handle rule and please use stops.

  • It’s 7:00 a.m. and the ESM is trading 1567.25, up 4 handles; crude is down 59 cents at 93.61; and the euro is down 5 pips at 1.3100.
  • In Asia, 8 out of 11 markets closed higher (Shanghai Comp. +0.02%, Hang Seng +0.75%, Nikkei +0.73%).
  • In Europe, 12 out of 12 markets are trading higher (CAC +1.06%, DAX +1.09%).
  • Today’s headline: “North Korea Readies More Missile Launchers”
  • Total volume: 1.63mil ESM and 5.8k SPM traded
  • Economic calendar: MBA purchase apps, Narayana Kocherlakota speaks, API, Richard Fisher speaks, 10 yr note auction, FOMC minutes and the Treasury budget.
  • Fair value: S&P +3.44, NASDAQ +6.78

MrTopStep Closing Print Video: https://mr-topstep.com/index.php/multimedia/video/latest/closing-print-4-9-2013

Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.
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DISCLAIMER: The information and data in the above report were obtained from sources considered reliable. Opinions, market data, and recommendations are subject to change at any time. Their accuracy or completeness is not guaranteed
and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any commodities or securities.

 

 

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