CHART OF THE DAY: Here's The Seasonal Model That Predicted Today's Rally

button more charts
button chart prev
button chart next

MarketSci Blog constructs a stock market model that uses historical seasonality of the stock market to determine the chance of a positive or negative day in the market, each day. For example, September has historically been a bad month, falling more often than not.

Yet the first day of September has usually been a strong day according to MarketSci, with the highest tendency to end positive of any day in September. You can see this below by the green reading for 09/01. Thus today is making their model look like a star, given the strong rally. Moreover, this seasonal model bodes well for tomorrow as well, but not for next week.

Yet here’s a caveat:

MarketSci:

To be clear, I do NOT think that seasonality alone is sufficient to justify a trade; however, all of the seasonality plays included in this report have been consistent enough that I do think they should be one of many tools in the trader’s toolbox.

Seasonality is nothing new, it’s what many stock market almanacs have been examining for years, but everyone adds their own twist to their model. It’s also, as quoted above, not the end-all to trading, but rather just another factor to consider.

chart of the day, seasonality map, september 2010

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.