Great work with a quick analysis of the data. Much appreciated.
Original Message:
Sent: 09-18-2023 16:50
From: BARRY JOHNSON
Subject: Stock Trader's Almanac 6 Best Month's Market Timing Model
BIll, thanks for your diligence.
Your data very convincingly debunks the claims of the reliability of this anomaly in the article, although I read it with skepticism prior to your data.
PS Another "Big Bill" Thompson was the last Republican mayor of Chicago. He debunked the Democratic monopoly of enshrined "Chicago-style" politics.
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BARRY JOHNSON
Original Message:
Sent: 09-10-2023 11:59
From: WILLIAM THOMSON
Subject: Stock Trader's Almanac 6 Best Month's Market Timing Model
Some time ago AAII published "Using Seasonal and Cyclical Stock Market Patterns" (https://www.aaii.com/journal/article/using-seasonal-and-cyclical-stock-market-patterns), which included a 6-Month Seasonal Switching Strategy from Stock Trader's Almanac (STA) (https://stocktradersalmanac.com/strategy.aspx). The basic premise of the model is that holding stocks each year only from October 1 to March 31 and selling on April 1 will lead to significantly greater returns. The claims made by STA were pretty impressive, so I decided to do a deeper dive to check their validity. The data used by STA went back to 1950, but I was more interested in checking the model in a more recent time span. Using the data in the STA study above, I examined the most recent ~20 years (10/2/2001 to 4/7/2022), a period of 74930 days (20.515 years), and 5166 market days. Here's what I found:
Date DJIA STA Value Buy/Hold S&P500 STA Value Buy/Hold
10/2/2001 8950.59 $1074.00 $1074.00 1051.33 $775.63 $775.63
4/7/2022 34583.57 $3076.51 $4149.75 4500.21 $2311.98 $3320.08
CAGR 6.81% 5.26% 6.81% 7.35% 5.47% 7.35%
It seems clear to me that the STA 6-Month Timing Model, while it worked in previous years (7 losses in 50 years), has not lead to increased returns over the past 20 years. Plus, it is a bit deceptive to me for STA to promote each year the model's overall validity by simply adding the recent year's performance to that of the previous 70+ years. BUYER BEWARE!!
I have not yet checked STA's claims for "The Four-Year Presidential Election Stock Market Cycle" or "January's Basket of Indicators and Trading", but plan to do so in the near future.
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BILL THOMSON
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