Commodity Trader's Almanac 2O11

66

LAST-HALF OF JULY SHORT S&P 500

Active traders looking for a high probability play should pay heed to this potential market

move. Sell the September S&P 500 on or about July 15 and hold until on or about July 26. This

trade has a 67.9% success rate, registering 19 wins against 9 losses in the last 28 years. The

best win was $19,150 in 2002, and the worst loss was in 2009, posting a $12,650 bereavement.

Looking at the chart on page 140, you will

see the average price tendency is for a mid-

summer sell-off. Part of the reason is perhaps

due to the fact that July starts the worst four

months of the year in the NASDAQ and also

falls in the middle of the worst six months for the

Dow and S&P 500 indices.

Mid-July is also when we typically kick off

earnings season, where a strong early month rally

can fade, as active traders may have “bought the

rumor” or bought ahead on anticipation of good

earnings expectations and then turn around and

“sell the fact” once the news hits the street.

Watch for an early month rally, and pay close

attention, especially if we trade near the monthly

predicted resistance level using Pivot Point analy-

sis (2010 edition, pages 6–9). Market conditions

that tend to start out strong early in the month tend

to fade towards the middle to end of month. S&Ps

sold off early in July the past two years, creating

losses for this trade two years in a row. However,

using the timing tools detailed ...