What Traders Need to Know About July
Jul 3, 2023
It’s the first week of July, so it’s time to check in on seasonality tendencies among the most traded futures products. Given differences in monetary and fiscal regimes on longer time horizons relative to contemporary times, our review covers the past five years and 10 years.
There’s good news and bad news for seasonality watchers in July. On the positive side, data trends have normalized for S&P 500 (/ES) and Nasdaq 100 (/NQ). The bad news, however, is that the rest of the futures products covered in this report still see their five-year average performances are all eclipsed by their respective standard deviation of returns (a function of the February to July 2020 window proving volatile around the onset of the COVID-19 pandemic). This period of unreliability will be ending as we move into the second half of 2023.
In recent months, we’ve addressed the popular turn of phrase, “sell in May and go away,” concluding that it was a nice rhyme, but nothing more. At least for equity traders, the proper phrase has been “buy through July,” as the middle three months of the year have produced the strongest returns for stocks of any three-month window over the past five years and 10 years.
July is a very bullish month for /ES, on a seasonal basis. Over the past five years, it has been the best month of the year for the index, averaging a gain of +4.37% (σ = 3.08%). Over the past 10 years, it has been the second-best month of the year, averaging a gain of +3.33%.
July is a very bullish month for /NQ, on a seasonal basis. Over the past five years, it has been the best month of the year for the index, averaging a gain of +5.58% (σ = 4.45%). Over the past 10 years, it has been the best month of the year, averaging a gain of +5.06%.
July is a bearish month for /ZN, on a seasonal basis. Over the past five years, it has been the worst month of the year for the notes, averaging a loss of -8.86% (σ = 10.28%). Over the past 10 years, it has been the worst month of the year, averaging a loss of -4.84%.
July is a bearish month for /ZB, on a seasonal basis. Over the past five years, it has been the worst month of the year for the bonds, averaging a loss of -5.46% (σ = 7.34%). Over the past 10 years, it has been the worst month of the year, averaging a loss of -3.38%.
July is a bearish month for /CL, on a seasonal basis. Over the past five years, it has been the fourth worst month of the year for the energy product, averaging a loss of -2.13% (σ = 4.55%). Over the past 10 years, it has been the third worst month of the year, averaging a loss of -3.44%.
July is a bullish month for /GC, on a seasonal basis. Over the past five years, it has been the third-best month of the year for the precious metal, averaging a gain of +1.46% (σ = 4.71%). Over the past 10 years, it has been the fourth-best month of the year, averaging a gain of +0.90%.
July is a mixed month for /6E, on a seasonal basis. Over the past five years, it has been the fifth-best month of the year for the pair, averaging a loss of -0.03% (σ = 3.00%). Over the past 10 years, it has been the third-best month of the year, averaging a gain of +0.27%. Note: the time series for Euro futures does not extend beyond 2018; the data series has been backfilled using EUR/USD spot rates as a proxy.
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multi-national firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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