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JTH

Trading the Stats: February, Week 5, Part 1/2

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Wrapping up a wonderfully horrible month, for the S&P 500, this was the 8th worst January over the past 66 years, heres the bottom 10

1/2/2009 -8.57%
1/2/1970 -7.65%
1/4/1960 -7.15%
1/2/1990 -6.88%
1/3/1978 -6.15%
1/2/2008 -6.12%
1/3/2000 -5.09%

1/4/2016 -5.07%
1/3/1977 -5.05%
1/2/1981 -4.57%


Long-term Data:
For the Monthly, Weekly, and Daily timeframes, usually the charts posted of the S&P 500 cover 41 years, W4500 covers 28 years, with AGG covering 12 years. The chart below comprises all the statistical data posted from those timeframes "everything." Using this chart as a template, gives us a frame of reference or a base line for what the word Average really means.

I did this because some folks might look at a monthly chart of the S&P 500 and see (for example) the month of June has a 59% winning ratio and think this is above average, when in fact it isnt. For the monthly chart of the S&P 500, we can see the average winning ratio for all months combined is 61%. This means anytime you see me post a monthly S&P 500 chart, if the winning ratio is below 61% then it is actually below the 41-year average and the same principles also hold true when comparing average returns, average positive returns & average negative returns.

Making a case for buy & hold: We can also see that in all cases, the monthly timeframe has a higher winning ratio than the weekly, and the weekly timeframe has a higher winning ratio than the daily. What does this mean? In theory it means that the more you trade or attempt to time the markets, the more the statistical odds are stacked against you. In addition, while Im not able to equally calculate the compounded returns, Id be willing to bet the odds are further stacked against you, especially over longer periods of time.
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SPXs February ranks as the 10th best month of the year (COLD)
8th best winning ratio
10th best positive average gains
10th best average gains
7th best negative average gains
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W4500s February ranks as the 3rd best month of the year (HOT)
6th best winning ratio
2nd best positive average gains
3rd best average gains
7th best negative average gains
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AGGs February ranks as the 6th best month of the year (AVERAGE)
9th best winning ratio
8th best positive average gains
8th best average gains
1st best negative average gains (Best of the year)
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Taking a look at what has historically happened to February when January has closed up or down.
SPX shows both a weaker winning ratio and weaker average gains
W4500 shows both a stronger winning ratio and stronger average gains
AGG shows little change but does have a slightly higher winning ratio and slightly higher average returns
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SPXs week 5 ranks as the 2nd best week within the 13-week 1st quarter period (HOT)
1st best winning ratio (best of the quarter)
2nd best positive average gains
2nd best average gains
10th best negative average gains
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W4500s week 5 ranks as the 8th best week within the 13-week 1st quarter period (AVERAGE)
6th best winning ratio
2nd best positive average gains
7th best average gains
10th best negative average gains
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AGGs week 5 ranks as the 12th best week within the 13-week 1st quarter period (DEAD LAST)
9th best winning ratio
13th best positive average gains (worst of the quarter)
12th best average gains
12th best negative average gains
Note: Weeks 3-7 are statistically weak in both winning ratio and average gains.
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Taking a look at what has historically happened to week 5 when the previous week 4 has closed up or down.
SPX shows a slightly weaker winning ratio and weaker average gains
W4500 shows a weaker winning ratio, but stronger average gains
AGG shows a slightly weaker winning ratio and weaker average gains
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This concludes part 1, for part 2 click Trading the Stats: February, Week 5, Part 2/2

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Updated 01-30-2016 at 11:29 AM by JTH

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