Is April a Good or Bad Month for Stocks?
by Brian Paragamian, Professional Stock Trader Live, LLC | March 30, 2010Print
April in fact has been the best month for the DJIA since 1950. In the past 21 years April has also been the best performing month for the S&P 500. April 1999 was the first and only month for the DJIA to post a gain of 1,000 points.
Since 1950 April typically is a good month for stocks and ends the “Best Six Months” (November-April) for the Dow Jones Industrial Average and S&P 500.
This bodes well for April 2010, correct? Not necessarily. This April, other factors come into play that may not give us the spring cheer we expect:
- Midterm elections loom ahead and stocks suffer somewhat during these times.
In midterm election years like 2010, April has been a somewhat weak month, averaging a 1.2% gain for the Dow versus 2.3% for all other years. April’s 1.6% average gain for the S&P 500 is reduced to 0.2% and NASDAQ’s 1.5% gain actually turns into a 0.2% loss during midterm years.
- Stock market has rallied some 70% off the March 2009 lows with only an 8% correction in Jan-Feb. 2010. Therefore, this April could be a very tricky month and one should error even more on the side of caution. With the stock averages overbought and midterm elections ahead we really need to be prepared for some corrective activity and more volatility coming back into the market place. Complacency is running rampant on Wall Street these days and when I see that, I begin to get very cautious. Complacency and low volatility alone are not something to fear. However, after an unprecedented move of 70% move in the averages since the March 2009 lows with no real correction, a lackluster economy, typical midterm elections pressures, sovereign debt issues still looming and the markets being overbought one must be very cautious as we head into the new quarter.
- The Stock market is jammed overbought by all measures. Take your pick of any measure and you’ll see that the market is unambiguously overbought.
More interesting facts about the month of April:
- The Dow has been up 12 of the last 15 years on the first trading day of April.
- The day before Good Friday has been another good day for the averages, the NASDAQ has posted gains in 13 of the last 15 years and 9 consecutive years since 2001.
- The day after Easter has typically been a rough day for stocks, registering as the worst post-holiday trading day but it has been improving of late.
- On the day after Easter the S&P 500 was down 16 of 20 years from 1984 to 2003.
- Since 2003 the S&P 500 has been up five times out of six in the month of April.
- On the Monday of Options expiration week the Dow has been down 4 of the last 5 years, but up 11 of the last 13 expiration days.
- In general the market has been prone to weakness after the April 15 Tax Deadline, perhaps as stocks get sold to pay the Uncle Sam, the taxman.
Since late November 2008, we have been teaching our members in our nightly video updates and daily live webcasts to be vigilant in this complex market environment. While we believe we can have further rally efforts towards the major resistance levels, S&P 500 1228.74 (61.8% Fibonacci retracement level) and DJIA 11245.95 (61.8% Fibonacci retracement level), we would like to bring to your attention the factors we have discussed above. As a result we are currently teaching our members in our real time setting how to identify a market turn; hedge their overall portfolios; and how to identify and take short positions with excellent risk/reward ratios. Currently, many of our members are coming into our real time trading environment and asking us to show them how to still day trade and profit in this overbought environment while limiting their risk.
Regardless of how you play the market, at ProfessionalStockTraderLive we always preach for you to use patience, discipline and stops.
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Brian Paragamian, the Senior Trader at ProfessionalStockTraderLive.com has been trading stocks for 26 years since he was age 17 and was a stockbroker for 15 years. He knows the ins and outs of Wall St. Brian is now sharing his proprietary trading system/style with his members so they too can take it to Wall St. and win. ProfessionalStockTraderLive.com has been educating their members through their daily live webcasts since December 2008.