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Frank Hogelucht

Frank Hogelucht

Individual investor, trading for a living since 2007, taking a statistical approach in combination with historical market data and addicted to developing market-neutral algorithmic trading…

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Triple Positive and Up gt. +3.0% Month-To-Date

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www.CartoonStock.com

The S&P 500 started into December with three up-days in a row, and is now up 3.74% month-to-date on the third session of the month. As shown on a previous posting (see Looking Forward to a Strong December), two strong up days (each with a gain greater than +1.0%) right at the start of a month had significantly positive implications looking at the respective monthly performance.

But probabilities and odds are even more tilt in favor of a positive monthly performance where the S&P 500 started into a month with three consecutive higher closes, at the same time being up greater than +3.0% month-to-date on the close of the third session of a month in the past.

Table I below shows the date of the last session of the month ('End-of-Month Day'), the S&P 500′s historical (since 1930) performance ('Monthly Returns'), the respective number of sessions, the maximum gain and the maximum loss (drawdown) during the month (assumed one went long on the last session of the previous month), and the respective monthly performance for the previous ('Prev. Month') and the then following month ('Next Month') on those occurrences (month) where the S&P 500 closed higher the first three sessions of a month, at the same time being up greater than +3.0% month-to-date on the third session of a month in the past.


(* no close below trigger day's close during period under review)

Table II below shows the respective weekly (for the respective month traded) and monthly key performance figures like the number of weeks / month traded, the percentage of positive weeks / month, the median weekly / monthy return, ... and the maximum gain and loss for the respective weeks / month traded.

It is interesting to note that

  • ... the S&P 500 closed out the month with a gain on 35 out of 40 occurrences (or 87.50% of the time), thereof the last 21;
  • ... the median monthly gain of +6.21% significantly surpassed the S&P 500′s at-any-time monthly performance of +0.88%;
  • ... the median weekly gain of +1.35% significantly surpassed the S&P 500′s at-any-time weekly performance of +0.28%;
  • ... the S&P closed out the month with a loss greater than -2.0% only once (1932), but finally gained more than +5.0% for the month on 26 out of 40 occurrences (or on 2 out of every 3 occurrences), and more than 7.50% on 18 occurrences (or almost 50% of the time);
  • ... with Distribution of Returns at 84.96%, the median monthly return is ranked in the top 15% of the respective at-any-time monthly returns; and
  • ... the S&P 500 never looked back and did not post a single close below the previous end-of-month close ('max. loss' is positive) on 28 out of 40 occurrences (or 70.00% of the time).


Conclusions:

From a statistical and historical point of view, after posting three consecutive higher closes right at the start of the month (and being up gt. 3.0% month-to-date on the third session) probabilities (winning percentage) and odds (expectancy) are even more tilt in favor of a positive monthly performance in December, and additionally there is a significantly above-average probability that November's end-of-month close (S&P 500 at 1180.55) will not be penetrated during the recent month. Any short-term consolidation of recent gains might provide a buying opportunity targeting higher prices during the remainder and / or at the end of December.

Successful trading,

 

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