Our research at EarningsBeats.com includes extensive seasonal studies using the seasonality tool here at StockCharts.com. We have recently ended the best historical period of the year, lasting from the close of trading on October 27th to the close of trading on January 18th. But the upward movement does not stop, it simply slows down. If you are looking for market sectors that will perform historically well over the next 3 months, keep an eye on Technology (XLK) and Materials (XLB). These two sectors have been the most consistent outperforming sectors in May since the start of this secular bull market.
But how about an industrial conglomerate that loves this time of year?
In my opinion there is no single industry group that loves March-May as much as Specialty Finance ($DJUSSP). The following is the “relative” (versus the benchmark S&P 500) seasonal performance by calendar month:
By adding up the monthly outperformance averages for each calendar month, we can quickly calculate that the DJUSSP absolutely loves the first 7 months of the year. Here is this group’s outperformance since the start of the secular bull market, broken down by the following two periods:
- January to July: +11.2%
- August to December: -1.6%
However, the specialty finance sweet spot is from March to May as this period of 3 consecutive months was the best, outperformed the S&P 500 by an average of 5.4% since 2013!
Perhaps the best news of all is that I am currently seeing a significant technical improvement in the DJUSSP as you can see from the graph below:
In addition to an apparent uptrend since October, relative strength set in almost immediately as the new year began. Although the entire pattern is not reproduced above, February weakness could represent a bottoming of the right shoulder in an inverted head and shoulders pattern that began in the second half of 2022. Clearing the overhead price resistance at 520 on a closing basis would confirm the pattern.
At EarningsBeats.com, we provide our members with 3 portfolios consisting of 10 equally weighted stocks designed to outperform the S&P 500 over a quarter. Then we pick 10 more equally weighted stocks for the next 3 months and so on and so on. Our model portfolio has outperformed the benchmark S&P 500 since the portfolio’s inception in November 2018 (+130.31% vs. +51.60%). We selected our latest portfolios as of Friday’s close and I included a specialty finance stock as 1 of the 10 equally weighted stocks in our model portfolio.
This specialty finance stock has outperformed the S&P 500 by an average of 17.2 percentage points from January through July, including 5.5 percentage points from March through May. I will provide my technical opinion on this stock in our next EB Digest. Just sign up for our FREE EB Digest newsletter and receive this special financial stock CLICK HERE and let us know your name and email address. No credit card is required and you can unsubscribe at any time.
Happy trading!
Tom
Tom Bowley is the Chief Market Strategist of EarningsBeats.com, a company that provides a research and education platform for investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR) that provides guidance to EB.com members every day the exchange is open. Tom has brought technical expertise here at StockCharts.com since 2006 and also has a fundamental public accounting background which brings him unique skills to approach the US stock market.
