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Looking Ahead To December’s Seasonality Pattern at Trader’s Narrative

december seasonality 5 last days historical annual data tableHere is another great guest post written by Wayne Whaley, CTA:

The S&P 500 was up 5.74% in November and is up 21.30% through the first 11 months of 2009.

Since 1950, the average month is up 0.67%. December is the best month of the year on average, up 76% (44 positive to 15 negative) of the time for an average gain of 1.64%. On a median return basis, December is second (1.49%) to November (1.83%).

If the first 11 months of the year are up 10% or more, the odds improve modestly, with December up 75.9% (22-7) of the time for an average return of 2.07%.

However, patience is in order as most of the gains come on the last five trading days, 46-13 (78.0%) for an average five day return of 0.97%. And I saved the best for last.

If the market is up more than 10% going into the last 5 trading days of the year, those five days are 27-2 (93.1%) for an average gain of 1.22%.

Markets and seasonal patterns rarely repeat themselves, but have a tendency to rhyme in some shape or form. When market move fails to meet historical parallels, it is often a signal that a change in direction is imminent. More on that later, if it develops.

If you have an interesting idea on the market and would like to write a guest post, drop me a line.

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2 Responses to “Looking Ahead To December’s Seasonality Pattern”  

  1. 1 Rainer

    what do you consider as the last 5 trading days? for example dec. 31 as a trading day as well, even though, it the trading hours are shorter than usual?

  2. 2 wayne

    i used the last 5 days of the year that trading took place. I believe for the last 30 years or so that has included the day before christmas and the four days between christmas and new years. Before that, I seem to recall that the holidays through the end of the year varied, sometimes with holidays on new years eve and christmas eve. I probably could have ran the study from the day before christmas through the end of year, regardless of the holidays to be seasonally consistent

    These holiday trends are well documented and tend to be anticipated and then faded a day or 1/2 day early. I would work into it a day or two in front of the pattern

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