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SEASONAL TRADING


June Is A Bad Month For Stocks

06/03/11 08:39:48 AM
by Mike Carr, CMT

Traders fear September and October, months known for crashes, but June should also be feared.

Security:   SPY
Position:   Sell

Stock market crashes in the autumn are legendary. The historic decline of 1929 was in October, as was the 1987 plunge. These events are most likely overweighted in the minds of investors, since the long-term record shows June is actually a more bearish month.

Looking at a chart of the Dow Jones Industrial Average (DJIA) (Figure 1) shows that June and September are the only months that closed lower more often than they closed up. September is the more bearish of the two months, but June has been down in 47 of the past 90 years.


Looking at more recent history, only June has been a down month for SPY, an exchange traded fund (ETF) that tracks the Standard & Poor's 500 (see Figure 2). June has been down almost two-thirds of the time, showing a stronger bearish tendency than any month for the DJIA.

FIGURE 1: DJIA, MONTHLY. June is a historically weak month for the Dow Jones Industrial Average.
Graphic provided by: Trade Navigator.
 
June has also been a down month for the NASDAQ 100, at least as measured by the performance of the QQQ ETF (see Figure 3). February is more bearish, but we definitely see weakness in June for this index as well.

FIGURE 2: SPY, MONTHLY. June is also a bearish month for the S&P 500.
Graphic provided by: Trade Navigator.
 
Data shows that June deserves the bearish reputation of September and October for stock market investors. With history as a guide, this month may not be any kinder than May has been to stock market investors.

FIGURE 3: DJIA, MONTHLY. Again, we see a bearish pattern for June.
Graphic provided by: Trade Navigator.
 



Mike Carr, CMT

Mike Carr, CMT, is a member of the Market Technicians Association, and editor of the MTA's newsletter, Technically Speaking. He is also the author of "Smarter Investing in Any Economy: The Definitive Guide to Relative Strength Investing," and "Conquering the Divide: How to Use Economic Indicators to Catch Stock Market Trends."

Website: www.moneynews.com/blogs/MichaelCarr/id-73
E-mail address: marketstrategist@gmail.com

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