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JTH

Trading the Stats: 2nd Quarter

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While the rough start to January 2016 jolted many of us, February managed to close flat, followed by what was an impressive March close. Somehow, the S&P 500 managed to eek out a positive gain for the 1st Quarter, it's not an impressive win, but it is an important psychological victory for those who are still mentally battered. I've noticed the bearish slant over the past 2 months, and while I don't agree with it, I do understand that when folks get their teeth kicked in, it takes a while before people are ready to re-engage the markets.

Here's the thing, there have a been a few times where I've been defeated, and when this happens, my first inclination is to turn everything off and just step away. But I also want to say that it's important not to step away for too long, because you risk missing the recovery, (for fear of getting beat up again). If you are one of those people (as I have been) then I would encourage you to acknowledge you have a bias, and just work to focus on the here and now. Here's the facts, we've roughly recovered over 80% of the losses from the 2015 highs to the 2016 lows, and if someone hasn't recaptured some of those gains, then they might want to re-examine what can be done differently.

Conversely, not to be too much of a hypocrite, I have publically stated that I believe we were operating under bear market conditions, and much of this was based on the underperformance of the Transportation Index. But February changed the game, and March confirmed it, all I want to say here is, if we get more follow through from April, be prepared to capitalize on it!

Thanks for allowing me to rant, now let's get to some stats.

For the S&P 500, this was the 24th best close over the past 41 years, with a .77% gain. Quarter 2's stats are on par with Quarter 1, but at some point in time, there is a transition between Quarters 2 & 3, where we drop off the statistical cliff, and sometimes this can begin in June, so be sure to look out for it.
Buying Gold Companies-2016-q-2nd-spx-png


For W4500, this was the 20th best close over the past 28 years, with a -.59% loss. Quarter 2's stats are lower than Quarter 1, and below the baseline average of all quarters combined. But, there is a significant statistical anomaly I'll talk about later on in the blog.
Buying Gold Companies-2016-q-2nd-w4500-png


For AGG, this was the best close over the previous 12 years, with a 2.60% gain. Quarter 2's stats are on par with Quarter 1, and we notice a surge in Quarter 3 (traditionally when stocks pull back during the summer slump).
Buying Gold Companies-2016-q-2nd-agg-png


Looking at what happens to Quarter 2 when Quarter 1 closes up or down:
__For the S&P 500, when the 1st quarter closes up, the second quarter's stats are about the same, but slightly stronger.
__Now here is the statistical anomaly I was referring to earlier (3rd chart to the right, middle bar or bar #8). Of the 9 times W4500 closed down in the 1st Quarter, it closed up 8 of 9 times in the second quarter, with an impressive 89% winning ratio and 9.71% average gains. I do acknowledge this is a limited statistical pool to work with, but it is impressive.
__For AGG, when the 1st quarter closed up, the stats for the 2nd quarter drop significantly, but again, 12 years worth of data is not much to work with, so I tend to take the AGG data with a grain of salt.
Buying Gold Companies-2016-q-2nd-all-png


For April's stats:
SPX ranks as the best month of the year, with an above baseline 71% winning ratio and 1.8% average gains.
It has the 2nd best winning ratio, 6th best positive average gains, best average gains, and 2nd best negative average gains.
Buying Gold Companies-2016-m-apr-spx-png


W4500 ranks as the 2nd best month of the year, with an above baseline 64% winning ratio and 1.3% average gains.
It has the 4th best winning ratio, 5th best positive average gains, 2nd best average gains, and 4th best negative average gains.
Buying Gold Companies-2016-m-apr-w4500-png


AGG ranks as the 5th best month of the year, with an above baseline 67% winning ratio and .13% average gains.
It has the 3rd best winning ratio, 6th best positive average gains, 5th best average gains, and 9th best negative average gains.
Buying Gold Companies-2016-m-apr-agg-png


Looking at what happens to April when March closes up or down:
__For the S&P 500, when March closes up, April's stats are about the same (although slightly weaker).
__For W4500, when March closes up, April's stats are stronger, making it on par with the S&P 500's normal April stats.
__For AGG, when March closes up, April's stats are much weaker (although there is limited data to work with).
Buying Gold Companies-2016-m-apr-all-png


Covering the day of the week, for the 1st quarter of 2016:
For SPX & W4500, the winning ratios are not very good. The average gains look good for Tuesdays & Fridays and bad on Monday's & Wednesdays. Meanwhile, AGG shows us some strong stats on Wednesdays and Thursdays.
Buying Gold Companies-2016-d-dow-png


Going to cut it short, I still have a Week 14 blog to do this weekend, where I'll get into the finer details.
Take care...Jason

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Updated 04-01-2016 at 12:30 PM by JTH

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Comments

  1. ravensfan's Avatar
    Jason those first few paragraphs described me to a tee. Thanks for the perspective.
    Great work and much appreciated.
  2. FAAM's Avatar
    Jason, thanks so much. Curious why you've not mentioned the long term data chart Tom has shown indicating a strong statistical probability for drop in equity market sometime in April for a couple months or so since this is a Presidential election year. Seems that is a significant factor to consider that is somewhat anomalous to your data & analyses presented. (I'm so confused...). Also overall sentiment is up pretty high now if I recall correctly, which usually means a top of some sort is fairly near. I'm no expert, just thinking, and greatly value your assessment of these things.
  3. FAAM's Avatar
    (Deleted repeat post. )
  4. JTH's Avatar
    Hi FAAM

    Tom's chart is of the DOW, while I track the stats of SPX/W4500/AGG. The chart he posted also goes back to 1900, I personally don't believe stats that old are as relevant with today's price action, because trends change over time. April is a good month, and Pre-election Q2 is one of the best quarters of the election cycle. I can't tell you much more than that due to copyright issues, but if you have a copy of the 2016 Stock Trader's Almanac, I can point you to more info which may alleviate any trepidation you may have. Either ways, stats cannot predict the future, but they can give us valuable info about past market behaviors.

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