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Timing


Performance can be improved by timing trades for the Turn of Month Effect and the Santa Claus Rally.


Stocks

S&P 500 Index

Daily closing prices for the S&P 500 Index were analyzed to determine average gains:

SP500 timing

The Turn of Month Effect occurred from the 26th of a month through the 6th of the following month. Rallies also occurred during December 16-24. Other days had a net loss even though there were minor rallies during March 15-18, April 15-18, and November 21-25.

Yale Hirsch, who popularized the Santa Claus Rally, said it occurs during the last five trading days of December and the first two trading days of January. I prefer to say the Santa Claus Rally occurs during December 16-24, separating it from the December/January Turn of Month Effect.

The best time to buy is the first trading day before the 26th, except before the 16th in December. The best time to sell is the first trading day before the 7th.

Dow Jones Industrial Average

Daily closing prices for the Dow Jones Industrial Average were analyzed to determine average gains:

DJIA timing

Results were roughly similar to those for the S&P 500 Index. There was a Turn of Month Effect and a Santa Claus rally. Other days showed a net loss.

Day of the week

Daily closing prices for the S&P 500 Index were analyzed. The average gain by day of the week was:

day

The numbers are small enough to be ignored. The largest magnitude is 0.07 boxes, which is about 0.07%.

Some pundits say corrections, defined as a decline of at least 10%, are unlikely to end on Monday. An analysis of daily closing prices for the S&P 500 Index shows downtrends (and uptrends) of at least 10 boxes, which is roughly the same as 10%, are least likely to end on Wednesday or Thursday:

end

Sharp one-day declines

Some pundits say a sharp one-day decline presents a buying opportunity. An analysis of daily closing prices for the S&P 500 Index shows a decline of at least one box can be expected to result in a further decline of 0.05 boxes on the following day.

Real estate index funds

The Real Estate (realty) Fund Strategy uses the real estate index funds IYR and VNQ. IYR was chosen for analysis because it has a longer price history:

IYR timing

Results were roughly similar to those for the S&P 500 Index. There was a Turn of Month Effect and a Santa Claus rally. Other days showed a net loss.

Treasury bond fund

Analysis of IEF, the 7-10 Year Treasury bond ETF, suggests the best time to buy is the first trading day after the 5th of the month and the best time to sell is the last day of the month. However, to make it coincide with the best time to sell stocks and stock call options I will define the best time to buy as the first trading day before the 7th:

IEF timing