The Encyclopedia of Technical Market Indicators by Robert W. Colby

Author:Robert W. Colby
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2003-03-17T16:00:00+00:00

Months of the Year:

Significant Seasonal Tendencies to Rise or Fall

Arthur A. Merrill, CMT, found that not all months of the year have been equally rewarding, and he proved it in his classic book, Behavior of Prices on Wall Street, Second Edition, The Analysis Press, Chappaqua, New York, 1984, 147 pages.

Using the calendar and price changes for the DJIA, he counted the number of times the market rose or fell for each month of the year over an 87-year period, from 1897 to 1983.

Eight of the 12 months saw higher stock prices most of the time. The market rose 55.5% of the time in the average month.

The best months were December (rising 68% of the time), August (rising 67% of the time), and January (rising 64.3% of the time). November, July, March, and April were strong, in that order, rising 58.8% to 57.1% of the time. October was below average, up only 51.6% of the time.

The worst months were September (rising 44.3% of the time), June (rising 44.9% of the time), February (rising 46.9% of the time), and May (rising 48.0% of the time).

We duplicated and updated Merrill’s study using 101 years of month-end closing prices for the DJIA, from 1900 through 2000. Our findings closely match Merrill’s. For the frequency of winning months of the year, the top three months are still December, August and January. The worst months are still September, February, May and June.

There have been some small shifts since Merrill’s study 17 years ago. Thanks to the great bullish stock market uptrend over that time period, our most recent data shows that over the past century the average month rose 56.6% of the time, up from 55.5% in Merrill’s study. December, the strongest month, is even stronger. Strong July, March and November have also gained further strength. June and May are still below average, but they are not as bad as they once were.

September, the worst month, has become even worse, rising only 42% of the time over the past century. April, though still up 53.5% of the time, has slipped from slightly above-average to slightly below average.

Our table offers additional insights. In terms of the magnitude of price movement, December, July, January, August, April, March, November and June showed the best gains. September, May, October and February showed the worst losses. Fortunately, magnitude is in harmony with frequency, and that adds to our confidence in our findings.

101 Years of Monthly Performance for the Dow-Jones Industrial Average, 1900 through 2000

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