Tis The Season

Seasonality is a crucial factor for fundamental analysis but is often ignored by technical analysts who trade on a shorter time frame. To add to that point, the only fundamental analysis used by most technical analysts is economic data releases because of the short-term increase in volatility. That being said, technical analysis traders should never ignore seasonality because it is typically an excellent barometer for periods of strength and weakness for the entire market.  

For example, as we enter September, the S&P 500 ETF SPY traditionally recovers a bit from August lows and then drops to lower lows. From a technical perspective, looking at the seasonal chart (see below), a trader can begin to grab short positions for later this month while we are sitting at this short-term; Economic data released this week suggests the same as Q2 GDP growth was lower than expected, monthly jobs were lower than anticipated, and PCE was higher than projected. All of these are bearish and, quite frankly, puts fears of a recession back on the table. Next week is a short week with only a few relevant economic data prints, so that it could be a low volume, slow chop type of week but ultimately setting up for a push towards August lows.

Enjoy the long weekend and follow us on Twitter now follow us; @ThrashCapital!