Trading Seasonal Trends!

Hi Folks,

Today I wanted to cover historical market averages and seasonal trends over the past 20 years. Its important to remember that these are averages over time and not necessarily a definitive forecast of where the market may go or where its heading, The market will do as it does.

These data points can help with planning future trades, specifically giving realistic expectations of market performance based off past averages. Essentially it helps a trader eliminate bias without getting stuck in a "The market only ever goes up" mindset, which creates poor short time trading habits in the long run.

So, what does the historical average return look like for the S&P 500 over the past 20 years?

Historically 10 of the 12 months for $SPX over the past 20 years have been break even or resulted in a positive gain. Seasonally the two weakest months have been June at an average of -0.1% and September, posting an average loss of -0.7%.

Another important data point is "gain frequency". January sitting at the lowest at 50% and August, September and October slightly ahead at 55% which categorizes them as the weakest months for the market over the past 20 years.

Based off of pure data September sits as the weakest performing month for the S&P 500 over the past 20 years. Its important to zoom into that historical performance though. Historically September has rallied strong and made new YTD highs within the first 2 weeks of the month, over the past 20 years, met by a swift short term correction into a bit of a lull through October.

Lets move ahead and review S&P 500 2025 YTD data.

So far this year has been quite eventful in terms of how fast and how far the S&P 500 has moved based on percentages. To start, historically January through February were slightly above average in terms of performance. Moving within a 4% range.

March through May is where things changed. A 15% correction took place from March into the first / second week of April. Followed by a "V" bottom recovery straight into June. From June the market has rallied an additional 10% marking a 25% recovery and rally from the April bottom.

Now, just by visually examining this S&P 500 YTD performance chart you can see how much of an outlier year 2025 has been in compared to historical average performance. The correction was swift followed by an explosive rally higher. A 25% move from the April bottom within a 5 month period into today.

Lets overlay the historical average in Orange for comparison!

Comparatively we're back into the mean / slightly above historical averages. Its interesting to note the sideways action August through mid September tend to see. Comparatively the same as what we're experiencing now, although from a volatility standpoint the market is more volatile here then the collective 20 year data point. Which is an interesting talking point because markets tend to become more volatile near local short term tops and short term bottoms as price and trend begins to pivot.

What's next for potential market moving data points in the coming weeks?

• Producer Price Index (PPI) is scheduled for release on Wednesday, Sept 10th

• Consumer Price Index (CPI) is scheduled for release on Thursday, Sept 11th

Both data points are released at 8:30AM Eastern Time

Followed later in the month by a potential rate cut. Keep in mind high beta tech stocks are quite sensitive to interest rates, as it stands the market may be pricing in the high likelihood of a September rate cut but if that doesn't materialize because of better then expected PPI and CPI data prints it could give the market a strong reason to pull back on recent strength.

As a short term trader how can I plan ahead?

I like to look at where the market has been and take note of all the major points of previous support and resistance. These are "known" price points in the market. Old resistance can turn into new support, which in the case of mapping out where the market could go, whether it be higher or lower, it helps avoid big surprises and it keeps expectations realistic.

The historical average of a September seasonality correction has ran about 2.5% on the S&P 500 over the past 20 years. The largest was in September of 2022 at -9.3% but that basically marked the bottom of the bear market that year.

If the S&P 500 were to correct 2.5% from todays price point it would sit it back nicely on the $635 support. Which has held the previous 2 times it was tested in the past 3 weeks.

Rotation! Rotation! Rotation!

Rotation keeps healthy bull markets alive! Keeping in mind the strength of this current bull market a small correction could come in the way of rotation. More of a "stealth" move then anything else. We've already started to see these stealth moves over the past few weeks in market leading stocks such as $NVDA and $PLTR. Both stocks have broken their uptrends from the April reversal and rally.

$NVDA is 10% off of all time highs in the past 6 trading days

$PLTR is 20% off of all times highs in the past 17 trading days

A further short term correction or short term consolidation could set these names up fantastically for a year end rotational / rally play.

Where can I look for strength next week?

Robinhood $HOOD was set to join the S&P 500 on Friday after the close. Rallying 6% higher after hours. $HOOD could try to make a momentum move into all time highs at some point next week.

Rocket Companies Inc. $RKT Made a bullish flag breakout on Friday. A red to green setup Monday morning could be a solid potential entry. Accumulation volume characteristics have been taking place for the past 6 weeks as well!

$RKT sits on a 45% short float! This has short squeeze written all over it!

I hope this will help with a head start to next week! Plan ahead and avoid putting on too much risk during a potential volatile period in the markets.

Cheers and happy trading!