One of my readers who goes by the callsign of ‘captainboom’ yesterday in passing mentioned that the week before the 4th of July was traditionally a bullish month, which of course peaked my interest. I used to work with a very talented statistician a few years ago going by Volar who among other things regularly posted very compelling seasonal analysis. I’m in the process of recreating some of that work in Quantopian but until then I think a glance of some of Volar’s general seasonal stats over the past fifty years should suffice.
The longest day of the year has arrived but most of Europe has already been sizzling for the past few weeks. Down here in Spain we regularly have been touching the 35 Celsius scale which is about 95 Fahrenheit for all you metricphobic North Americans. Although I love to bitch about the cold during the winter what really irks me the most is the insufferable summer heat here in Valencia which unfortunately comes with a ton of humidity – we’re talking 80% plus at times. Which is quite different from the dry desert like heat I had gotten accustomed to living in California for about 20 years.
We’ve watched the tape gyrate on a slow downward trajectory for several weeks now and a final resolution, to the up – or down – side, continues to evade us. Which I’m sure has been jittering quite a few nerves out there, especially given that many participants are unaware of or unwilling to embrace the reality of distinct market cycles. Which unlike our seasons seem to come and go in fairly unpredictable patterns, much to everyone’s chagrin. However acceptance of a cyclical market is tantamount to survival as a trader, as has been the recognition of and then response to climate variations throughout our evolutionary history.
I feel rather conflicted about the price action over the past month and quite frankly that’s exactly how I should feel and thus act accordingly. Just take a look at a daily E-Mini chart and compare the March contract (ESH7) with the current front month (ESM7) and tell me what you see.