Wednesday October 26, 2011
by Sy Harding, editor Street Smart InvestingThe seasonal strategy is a mechanical strategy based on the market’s remarkable history of making most of its gains in the winter months each year while usually experiencing most of its corrections in the summer months.
According to our seasonal strategy, the market is now in its next favorable season, which we expect will result in a substantial rally in the winter months to produce a positive year by year end.
It’s similar to the age-old ‘Sell in May and Go Away’ strategy. But in addition, our strategy uses the short-term MACD indicator to usually pinpoint the entries and exits with more precision than simply using the calendar.
Thus, our approach gets its risk management by being out of the market for roughly 6 months of the year, or 50% of the time, as well as being out when the market is usually at most risk.
Conditions in the background are potentially improving. Recent economic reports in the U.S. have not been so relentlessly negative.
And the stock market is a discounting mechanism. That is, it acts now in accordance with what it expects conditions will be 3 to 6 months out. That is what has it usually ‘climbing a wall of worry’ in the early going when it reverses to the upside.
Our Seasonal Timing Strategy is now in its next favorable season. Its re-entry signal was triggered at the close on October 14 and our seasonality portfolio is 100% in an index fund tracking the Dow -- the
SPDR Dow Jones Industrial Average ETF (
DIA).
Learn more about this financial newsletter at Sy Harding's Street Smart Report.
