LOOKING AHEAD TO APRIL – THE BEST MONTH FOR THE BULLS

It’s still March, however, like any good chess player we want to be thinking a few moves ahead of the competition.  With that in mind, it’s helpful to take a look at the seasonal trends in April.  Historically, April is the best month of the year.  Let’s review some facts from the Stock Trader’s Almanac:

◆ April is still the best Dow month (average 2.0%) since 1950

◆ April 1999 first month ever to gain 1000 Dow points, 856 in 2001, knocked off its high horse in 2002 down 458, 2003 up 488

◆ Up five straight, average gain 4.3%

◆ Prone to weakness after mid-month tax deadline

◆ Stocks anticipate great first quarter earnings by rising sharply before earnings are reported, rather than after

◆ Rarely a dangerous month, recent exceptions are 2002, 2004, and 2005

◆ “Best Six Months” of the year end with April

◆ In pre-presidential election years since 1951, average gains more than double (Dow 4.3%, S&P 3.7%, NASDAQ 3.7%)

◆ End of April NASDAQ strength.

Resilient market, another good earnings season on the horizon, QE2 and the Bernanke Put, sell in May is still a month off, historical trends.  It almost looks too good to be true for the bulls….

Source: Stock Trader’s Almanac

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Schnuzzle

    It’s been to good to be true for the bulls since Fall 2010…

  • B Ferro

    It’s been too good to be true for the bulls since March 2009…

    The market will be up in April, it is all but pre-ordained. It will also be up more than the historical average.

    Not that hard – buy stocks and with leverage. 100% guarantee you can make money long; so simple.

  • chris

    i would agree with b ferro to be long now, but i would avoid (or use very judiciously) leverage.

    i’ll take some of that guarantee btw!

  • boatman

    the way the market has shrugged off everything negative it truly is ordained for this month.

  • Gonzo

    seasonality fails as soon as it is noticed

  • Chad

    I am not a bull, but don’t fight the trend. Stay flexible and don’t marry your positions. Earnings season will be good but the key will be the guidance. I noticed quite a few companies putting out weak quarterly guidance but maintaining their full year projections so far this year during the last season. That is a dangerous sign as companies guiding down may be misleading investors and themselves by thinking it will only be a one quarter phenomenon. The longer input prices remain high the more likely it is that we will see more and more companies guiding lower. That may just happen to correspond with the end of April this year…potentially. Stay flexible my friends and keep hedges on.

  • haha

    I can’t tell if that is a joke or not. It has the absurd over-confidence and all the other makings of a lemming-like behavior, which makes me think its a joke. BUt on the other hand, there are still some unfortunate souls out there who think you cannot lose money in the stock market, that this time is different, and that stock prices only go up.

  • http://www.mercenarytrader.com Jack Sparrow

    The amusing thing about the “April best month of the year” argument is how poorly the converse argument fared.

    Dial back to September, supposedly the WORST month of the year for equities based on all the statistical scuttlebutt. How did September 2010 actually turn out? After a very bearish August, bulls basically stormed the ramparts from Sep 1st onward. Catching the “risk on” wave beginning in Sep was THE move that made a lot of managers’ years — and a lot of stubborn bears got drowned in it.

    Does that mean some sort of metaphysical quid pro quo is due, with April crapping out? Not at all. April could indeed be a very bullish month.

    But then again, anticipation of how great April is “supposed” to be could have pulled forward a lot of speculative activity, leading to a crap-out when the true “effect” hits. One of the bizarre things about modern markets is how aware the current base of market players are as to various “tells,” Keynes’ beauty contest, and so on.

    The net result for yours truly is to say sorry Yale Hirsch, the old stock market almanac ain’t much help anymore. What is that saying about Wall Street analysts, “Don’t need ‘em in a bull market, useless in a bear market.” That is the way I feel about these easily gamed seasonal effects in respect to the charts. If the strong bullish undertone continues, the charts will confirm that. If things crap out, on the other hand, the charts will convey that too. Either way, where is the value in the almanac stuff? There is a certain point where widely dispersed strategies and nostrums are so degraded as to become more noise than signal, except as financial sportsfan type talk.

    Just a trader’s .02…

  • Gonzo

    ditto Jack esp. regarding last September and how uber-anxious folks were at anticipating ‘best month for bears’ + add that Hindenburg Omen = best recipe to catch everybody off guard (read too scared)

    the bullish April call is for those who missed the 1250 swing trade and/or want to stuff retail again (read too complacent)