NIBOT1 said:
I'm new to trading and have read that a strategy for trading the Dow futures that has a high probability for success is to go long on the Dow prior to Thanksgiving and hold for 6 weeks. The theory is people/ the market will be upbeat because of Christmas and the New Year.
Any thoughts on whether this strategy is likely to succeed in the current climate?
I doubt there are many 'traders' who would adopt such an approach - and my guess is that few who consider themselves traders would hold any position for 6 weeks as matter of course anyway.
Seasonality is a factor affecting sentiment and therefore price action but its just one of many - and probably as (un)reliable as other maxims like 'sell in May and go away'. It provides context, like loads of changing fundamental factors and breaking news etc - but a workable stand-alone strategy it is not.
Your post prompted me to have a look at the last 9 years DJIA data I have for December:
7 of 9 were up months; largest 2003 - 6.4%; smallest 1996 - .09%
2 of 9 were down months, largest 2002 - (-6.73%) smallest 1997 (-1.33%)
Average gain over all 9 - 1% BUT
The average difference between high and low for each of the months is 6.05% - so you would have needed deep pockets and a steady nerve to stick with it and finance the margin calls on most such trades in the past 9 years. In 2002 the H-L swing was 9.5% and you'd have been wiped out by the O-C change anyway!
IMHO - this year is a pretty problematical call - general sentiment is at an all time high but rapidly deteriorating fundamentals will affact taht sentiment sooner or later. Those of a contrarian nature will probably take present sentiment measures to be indicators of an immanent reversal. Others will continue to climb that 'wall of worry'
🙁
Better to just trade the action as it unfolds.
