Seasonality: Sell Signal Triggers

As of Thursday’s close, both the slower moving MACD indicators applied to DJIA and S&P 500 are negative (arrows in the charts below point to a crossover or negative histogram on the slower moving MACD used by the Seasonal Switching Strategy to issue a sell signal). At this time, there is a new Best Six Months MACD Seasonal Sell signal for DJIA and S&P 500. NASDAQ’s “Best Eight Months” last until June.

, Seasonality: Sell Signal Triggers
, Seasonality: Sell Signal Triggers

Tactical Seasonal Switching ETF Portfolio Trades

The following trades should be made for those following the Seasonal Trading Strategy:

Sell the Dow Jones Industrial ETF (DIA) and the S&P 500 ETF (SPY) positions.

Continue to hold Invesco QQQ ETF (QQQ) and iShares Russell 2000 ETF (IWM) as NASDAQ’s “Best Eight Months” ends in June.

Consider establishing a half position in iShares Core US Aggregate Bond ETF (AGG) with a Buy Limit of $115.00. 

Also consider establishing a half position in Vanguard Total Bond Market ETF (BND) with a Buy Limit of $85.65.

Sector Rotation ETF Portfolio Trades

Sell SPDR Materials ETF (XLB) and Vanguard REIT ETF(VNQ) as correlating seasonality end in May.

Thursday’s Seasonal MACD Sell Signal for DJIA and S&P 500 marks the early beginning of the “Worst Six Months.” Instead of simply ‘selling and going away’ today’s trades are the start of tactical adjustments that need to be made in portfolios. From now until NASDAQ’s Seasonal MACD Sell (earliest it can trigger is on June 1), the portfolios will be shifted toward a neutral stance. Positions that have historically performed well during the “Worst Months” should held along with positions that correlate to NASDAQ and Russell 2000. 

Historical Perspective

May officially marks the beginning of the “Worst Six Months” for the DJIA and S&P. To wit: “Sell in May and go away.” The “Best Six Months Switching Strategy,” created in 1986, proves that there is merit to this old trader’s tale. A hypothetical $10,000 investment in the DJIA compounded to a gain of $960,943 for November-April in 70 years compared to just $1,656 for May-October. The same hypothetical $10,000 investment in the S&P 500 compounded to $788,997 for November-April in 70 years compared to a gain of just $10,145 for May-October.