There's a strategy in trading the market called the Best Six Months Switching Strategy. The rule is simple. You buy on November 1st and sell on April 30th every year. This strategy developed based on the outperformace of these months over the other half of the year since 1950.
Since 1950, November, December, January, March and April have been the top performing months in that order. Although February isn't in that group, you add it in to complete the six month cycle.
From 1950 to 2006, trading the best six months resulted in a gain of 12673.97 Dow points. In comparison, trading the remaining six months resulted in a gain of only 174.61 Dow points. It's a huge difference.
In 2007 & 2008, the current bear market overruled our strategy. The best six months lost 2298.74 Dow points over the past two years. And the remaining six months lost 2626.07 Dow points. Not much of a difference there.
This strategy is rather useless to a short term day trader like myself, but it's not hard to believe that the summer months plus the end of summer perform poorly in any given year. People go on vacations, volume dries up, second quarter numbers are usually quiet, weather warms up, people become lazy, and so on. However, if we apply it to the current state of the market, it may be telling us that the current uptrend will likely top out by the end of this month.
With 8 more trading days left in this month of April, will the market continue to ascend into the final day of April?
