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DON'T IGNORE HISTORY

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We discuss so many different technical scenarios that sometimes we lose sight of what history has taught us. It's time to pause for a bit after a very nice rally in the equity markets and see what history has to say. For purposes of this discussion, all numbers below relate to historical performance on the S&P 500.

At Invested Central, we focus a great deal on historical tendencies and we believe you should too. There is overwhelming evidence that suggests viewing a calendar from time to time can immensely improve your trading or investing results. Let me give you a few historical facts to ponder, many of which you may already be familiar with.

Since 1950, the S&P 500 has advanced more often during the month of December than any other month. The ratio of advancing months to declining months for each calendar month can be seen below:

January: 36 times higher, 21 times lower
February: 31-26
March: 37-20
April: 38-19
May: 32-25
June: 30-27
July: 31-26
August: 31-26
September: 24-32
October: 34-23
November: 39-18
December: 43-14

Perhaps the biggest surprises on this list are April's 3rd place finish behind December and November, and September's dismal showing.

Now let's look at annualized returns from each month:

January: 17.01%
February: -0.24%
March: 11.97%
April: 14.77%
May: 3.12%
June: 3.18%
July: 10.53%
August: 0.50%
September: -7.19%
October: 11.01%
November: 20.93%
December: 20.46%

There are no huge surprises as the November thru January time period are the three best consecutive months to invest while the July thru September time period are the three worst.

We also study the historical trends on the NASDAQ and Russell 2000 to identify tendencies and we've found similar results, although the May and June months are much stronger for both the NASDAQ and Russell 2000, while March and July tend to be much weaker.

If your tendency is to attempt to improve your results via leveraging strategies, consider using the above historical tendencies to time your strategies more effectively.

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Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More
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