August can be a corrective month

Thackray’s Investors Guide and EquityClock show us a tendency for August to be a relatively weaker month – Brooke Thackray notes it is the 4th weakest month from an historic perspective. My observations are that the S&P500 is prone to an even greater tendency to selloff if July is strong.

Below is the EquityClock (www.equityclock.com) chart of the S&P500 – note the tendency for markets to weaken from about the third week of July into the end of August.

Hey–wait a minute–that’s, like, right now – right?

equityclock S&P

Below are charts of the S&P500’s performance over the summers of 1997, 1998, 1999, 2000, 2005, 2007, 2010, 2011, 2013, 2014, 2015. Each of these summers saw strong markets into July. Followed by strong selloffs in August.

1997

1997
1998

1998

1999

1999

2000

2000

2005

2005

2007

2007

2010

2010

2011

2011

2013

2013

2014

2014

2015

2015

 

Based on the historical pattern of weaker Augusts after strong July’s, my thoughts are to look for any signs of weakening from this point. I am inclined to hedge downside risk or raise more cash if markets appear to be following historic patterns.

One Comment

  • Thanks for the verification I have started to short the s&p this morning as the rounding off at the top of the chart looks and feels like a summer correction given the lack of caution in the marketplace…cheers…gene

    Reply

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