Availability

First of all we need to point out that the Seasonax App is only available on Bloomberg Professional Terminals and on the Thomson-Reuters Eikon interface. This is not because the makers of Seasonax want to be mean to people without access to these devices.

The reason is that the App requires highly accurate data bases of asset prices, index values, economic data, etc., to work with, and these two data service providers have such data bases available. The screenshots below should give you a rough idea how the app works – we include information about what you are looking at in the captions (a side note: no big learning curve is involved, the app is very easy to operate).

 

A screenshot of the Seasonax app, showing the 15-year annual seasonal chart of the S&P 500 Index. The statistics all refer to the time period/pattern that is highlighted on the chart, which represents the “seasonally weak period” of the index over the past 15 years – click to enlarge.

 

Seasonal Charts

So what is Seasonax, and why do you urgently need it? When we first heard about it, it sounded deceptively simple. The theory behind seasonal charts originally emanated from the commodities sector, in which seasonal price trends are a rather obvious feature – think e.g. about grain harvesting seasons, or the demand-driven winter and summer seasons in heating oil or natural gas.

Over time, people realized that many financial assets and currencies also exhibit seasonal patterns. From the Hirsch Almanac we know about several phenomena that were noticed long ago, such as the “Santa Claus Rally” in stocks, or an old saw everybody knows about: “Sell in May and go away”. It can actually be shown with the help of Seasonax that this is sensible advice in many (but not all) stock markets (here is how one can refine the strategy to improve returns).

From there it was only a small step to the realization that it might make sense to create seasonal charts – simply average index values or prices over a range of years, and construct a one year chart that shows the resulting average pattern. Easy, right?

And then people looked at nonsensical charts for a very long time. As we said, it sounds deceptively simple, but it actually took many years to get the algorithm right and make a useful application out of it.*

The main problem with previous seasonal charts was that they were not calendar-accurate. Holidays and other trading interruptions (such as the week after the 9/11 WTC attack, when US markets were closed) have to be taken into account. Failure to do so results in errors that ultimately leave one with useless charts, as their effects are cumulative.

 

Features I – Annual Seasonality

Enter Seasonax, which creates perfectly accurate seasonal charts – i.e., the most accurate seasonal charts that exist.

 

Gold, a 49-year seasonal chart (we have used a different color scheme – there are three to choose from, a dark one and two light ones). If you look closely, we have shifted the calendar year, so as to be able to capture the entire strong seasonal period from early July to late February by simply dragging the cursor across it. The small “pattern returns” window at the bottom on the right hand side shows the return produced by the pattern in every single year since 1968. A variety of seasonal statistics related to the pattern are shown in the table on the right hand side – click to enlarge.

 

The next screenshot shows the detailed statistics page for the chart pattern in gold we selected above, which can be called up separately.

 

Detailed statistics of the selected pattern for every single year. The “cumulative profit” line at the bottom on the left hand side shows the total gain one would achieved over time by being long gold between July 6 and February 23 in every year from 1968 until today – click to enlarge.

 

Similar to other technical tools, seasonal charts cannot guarantee a certain outcome in a specific time period. They merely give you a small statistical edge (and in some cases actually quite a big one) – and over time this edge adds up. Casinos live from nothing else but such a small statistical edge.

The nice thing about the Seasonax app is of course the detail it allows you to go into, something no simple, fixed seasonal chart can offer, even if it is an accurate one. For instance, the pattern return window at the bottom on the right hand side allows you to see at a glance if there are any “outliers” that might distort the pattern and cast doubt on its validity.

In the gold chart above, it is obvious that the more than 112.40% return achieved by the selected pattern in 1979 was in fact such an outlier. If that worries you, you can switch over to this page – the data filter menu:

 

The data filter menu – lo and behold, here you can simply deselect 1979, which will produce a 49 year gold seasonal chart and all relevant statistics without 1979! This can of course be refined further, by deselecting the second-best year as well, etc – click to enlarge.

 

The data filter menu is an enormously useful feature in our opinion, and it includes a few pre-programmed filters that can really speed up your work flow – for instance, you can select “only bullish” or “only bearish” years with just one click.

Since a bullish seasonal pattern will obviously be less reliable in a bear market and vice versa, one can quickly create a bullishly or bearishly biased comparison chart in order to gain some additional perspective.

Another really neat extra are the four US presidential cycle filters. It is well known that presidential cycles have a tendency to affect securities prices, as fiscal and monetary policy are most definitely influenced by election dates. The one click feature saves you from having to select every relevant year by hand.

By the way, below you can see what the 49 year gold seasonal chart without 1979 looks like (with the same pattern selected, i.e. the strong seasonal period from July 6 to February 23). Compare the statistical details to the details of the chart above which included 1979. All in all, this is telling us that the strong seasonal pattern is not a fluke, since it exists without the outlier year as well, but the average and cumulative returns are obviously a bit weaker.

 

The 49-year gold seasonal chart with 1979 deselected. The average return has declined from 7.76% to 6.29%, but the pattern as such remains definitely viable.

 

Below follows another chart with a filter applied – the 30 year crude oil seasonal chart with only bearish years selected. What makes this chart particularly interesting is that it actually doesn’t look much different from the seasonal chart that includes all 30 years.

The seasonally weak period of both charts is nearly identical – the main difference is that in the bearish seasonal chart, the decline in the seasonally weak period is twice as large as in the complete 30 year seasonal chart. The seasonally weak period in crude oil seems to be a statistically particularly reliable pattern.

When crude oil is in a bear market, shorting it in July and covering the short position in early January historically offers quite outsized return potential (given that a single contract controls 40,000 bbl. of crude, these large percentages add up to quite a few dollars and the percentage gains are of course magnified by the leverage inherent in futures positions as well).

 

Crude oil, with only bearish years selected. The seasonally weak period is particularly bad in bearish years but the pattern as such is almost the same as in the “all years” 30 year seasonal chart in terms of timing and its general shape – click to enlarge.

 

Features II – Intraday Optimization and Events

Let us say you are focused on day trading, or you have tasks like hedging large amounts of currency, or hedging price fluctuations in a commodity on a regular basis. In both cases intraday statistics should be of interest to you as a timing aid.

Since any type of instrument can be selected, intraday entries and exits on e.g. individual stocks can be optimized as well. Obviously, option traders will also benefit from this, as entering a position at the right time of the day can make quite a difference in terms of the option premiums one pays or receives.

As a hedger who enters into a longer term position it will also be interesting to have some idea at what time of the day it is likely best to buy or sell – particularly if large amounts are hedged regularly. The statistical differences associated with acting at specific times of the day may be small, but as noted above, they will quickly add up.

As an example, here is an intraday “seasonal” chart of the euro (EURUSD), showing the average pattern over the past 20 trading days, with the “strong” time period selected (strong for EUR, that is). Obviously, short term oriented forex traders will find such information quite useful as well. If e.g. a technical buy signal is received close to a point suggested as a good entry time by the seasonal pattern, it should greatly enhance confidence in the signal.

 

EUR-USD, intraday average pattern over the past 20 trading days, with the strongest intraday streak selected – click to enlarge.

 

Another highly useful extra are a number of event studies the app offers in pre-programmed form. An example is shown in the next chart below – the behavior of the S&P 500 Index in the time period surrounding the release of the FOMC statement over the past 15 years (this encompasses 120 meetings).

Similar charts are available for all sorts of important economic data releases, for specific days of the month, triple witching days, holidays, election days, and even more esoteric categories such as full moons or solar eclipses.

Funny enough, FOMC announcements and full moons have a very similar effect on the S&P 500 index (on average it is best to buy 2 days before the event and sell three days thereafter), but the annualized return on FOMC statement trades is 5.28% larger (a 27.28% return vs. the 22% return produced by full moons).

 

The FOMC statement pattern over the past 15 years (120 events). A holding period of five days has produced an average annualized return of 27.28% over the past 15 years – click to enlarge.

 

Here is a chart for day traders in stocks: When is it best to buy and sell tech stocks during the day?

 

Intraday optimization for tech stocks based on the DJ Technology Index – click to enlarge.

 

Patterns No-One Knew Existed

There is one thing about the app that is not only a lot of fun, but has the potential to help generating unusually strong profits as well. There is an important thing one needs to keep in mind about seasonal patterns: while they may sometimes subtly shift – for instance, traders have long known about the new year rally in small caps when tax loss sales are reversed, so they have started to anticipate it and over time, it has tended begin a bit earlier as a result – they are generally remarkably persistent.

If even well-known market behavior is rarely “arbitraged away”, it follows that relatively unknown patterns are probably particularly persistent. One of the more astonishing and interesting recent findings was that many individual stocks actually exhibit very distinct seasonal patterns as well (for an explanation of what may create these patterns, see e.g. this article on the topic as well as this one, which shows more examples).

The seasonally strong periods in individual stocks tend to be very strong and what’s more, they seem to be very “sticky”, i.e., they are often operative in a large majority of individual years. We show you an example below that is particularly eye-popping:

 

Single stock seasonality: a pattern with a duration of one quarter that generates an average annualized return of 84%, which has produced a loss in just 2 of the past 17 years (and these two years were two of the four worst years for the broad market in a century, rivaled only by 1931 and 1974) – click to enlarge.

 

A lot remains to be discovered in this area in particular, and many excellent profit opportunities are as yet untapped.

 

The Seasonax App Special

Seasonax currently has a special offer for new subscribers: in addition to a free one month trial, one gets a three month money back guarantee as well. In other words, there is nothing to lose, and one will have more than enough time to test the app extensively. If you realize after a few months that it is not for you, it won’t cost you anything – you just wave good-bye to it with a single email. Of course, chances are that most of you who try the app won’t want to do without it anymore, not least because you will very likely find out that it pays for itself very quickly – a single trade may well be all it takes.

If you place an order for the app through Acting Man, you will qualify for an additional life-time discount that is only available through us at this time. Details are available on request at info@acting-man.com (please write “Seasonax” in the subject line).

 

Footnotes:

 

* Dimitri Speck, the creator of the Seasonax App, has the rare combination of skills needed for such a task: he is a coder, and he knows the financial markets to boot. His fully systematic Stay-C commodity fund was the best-performing fund of its kind ever launched in Germany and his pioneering work on intra-day patterns in gold prices was the method the authorities used many years later to prove the LIBOR and Gold/Silver Fix manipulation cases against a number of banks.

 

 
 
 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.    

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