Saturday, August 15, 2015

Seasonal Cycles Primer

Analysis

Rules Based Trading - Known Trends Index (KTI)

1. When the KTI is at 5 or more, we will hold the Dow using two-to-one leverage (see Chapter 1 for information on mutual funds and exchange traded funds that allow you to do this).
2. When the KTI is at 3 or 4, we will hold the Dow using no leverage.
3. When the KTI is at 2, we will simply hold cash, earning a nominal interest rate of 1 percent per year.
4. When the KTI is at any level below 2 (i.e., -1, 0, or 1), we will hold a short position in the Dow.

Kaeppel, Jay (2008-12-23). Seasonal Stock Market Trends: The Definitive Guide to Calendar-Based Stock Market Trading (Wiley Trading) (Kindle Locations 4083-4088). Wiley. Kindle Edition.

Known Trends Components (+1 Bullish, -1 Bearish)

Days of the Month (+1)
-2, -1, 1, 2, 3, 4, 9, 10, 11, 12

November to May (+1)
Nov 1 to 3rd trading day in May

Summer Rally (+1)
-3, -2, -1 (Jun), 1, 2, 3, 4, 5, 6, 7, 8, 9 (Jul)

September (-1)
Any Sept day

Election Cycle
Between Oct 1 (mid-term election year (2) and Sep 30 (pre-election year - (3) +1
Between Nov 1 and Dec 31 pre-election year (3) +1
Between Jun 1 and Dec 31 of an election year (4) +1
Between Mar 1 and Jul 31 of a pre-election year (3) +1
Between -5, -4, -3, -2, -1, 0, 1, 2, 3 mid-term election day (2) +1

Cycles
40 Week Cycle (20 week Bullish Cycle) +1
8/7/201512/25/2015

212 Week Cycle (first six months) +1
7/27/20151/27/2016

Decades
October 1 to March 31 between years ending in 4 and 6 of current decade +1
March 1 of year 8 though Sept 31 of year 9 of current decade +1
October 1 of years ending 2 through December 31 of years ending in 5 for even number decades (00, 20, 40, 60 , 80) +1

Holiday Days
-3, -2, -1, 1, 2, 3 after major stock market holidays (excl. MLK day) +1


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