Recent March Rally- A Shorting Opportunity

HedgeFundLIVE.com — I definitely should not be as surprised as I am to see this latest lift in the market.  In my recent study on a large up day following two consecutive large down days in the S&P, I concluded by saying that I am short term bullish because that type of bounce has often signaled a short term bottom (I cited Jun. 8, 2010 and Nov. 21, 2008 as two of many examples).  

I had mentioned that I was bullish for the next 5-10 days, and I had written that blog on Mar. 18th.  So far, my thesis has been correct.  However, I am holding onto my shorts because I am longer term bearish still.  I don’t feel that the correction we saw was large enough, particularly given the macroeconomic circumstances going on in the world.  Apart from the macro picture, I believe we may be seeing some performance chasing as we are not only approaching month end, but more importantly, quarter end.  I should be looking to add into shorts in that case by late next week.

To help back my thesis, I took a quick look at historic monthly returns since 2000.  I’ll start by posting the average, median, max, min returns for each month since 2000:

Jan Feb March April 3.41% 3.08% 5.60% 1.57% -3.62% -10.73% 8.24% 9.47% -8.61% -3.50% -0.54% 4.68% -6.62% -2.36% 1.58% 4.00% 1.02% -0.08% 1.62% 0.98% 2.29% 1.88% -1.66% -2.15% -2.64% 1.28% -1.70% -1.69% 1.76% -1.61% 0.71% 8.15% -2.76% -2.08% 3.82% -6.26% -1.63% -9.54% -5.86% 7.27% 2.85% -2.07% 10.44% -3.65% Average -1.32% Average -2.34% Average 2.02% Average 2.03% Median -1.63% Median -2.07% Median 1.58% Median 1.57% Max 3.41% Max 3.08% Max 10.44% Max 9.47% Min -8.61% Min -10.73% Min -5.86% Min -6.26%   May   June   July   August   -8.03%   -5.70%   6.99%   -4.55%   5.52%   -0.27%   7.54%   3.58%   1.05%   -8.53%   -1.09%   1.22%   2.99%   -1.14%   -3.53%   1.01%   -3.34%   0.59%   0.18%   1.85%   2.91%   0.27%   3.45%   -1.23%   1.40%   1.69%   -3.46%   0.27%   5.16%   1.04%   1.64%   1.87%   -0.91%   -7.26%   -7.93%   0.49%   0.26%   -2.05%   -1.34%   -6.60%   -2.59%   3.22%   -1.98%   5.72% Average 0.40% Average -1.65% Average 0.04% Average 0.33% Median 1.05% Median -0.27% Median -1.09% Median 1.01% Max 5.52% Max 3.22% Max 7.54% Max 5.72% Min -8.03% Min -8.53% Min -7.93% Min -6.60% 

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http://www.hedgefundlive.com/blog/recent-march-rally-a-shorting-opportunity

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