|
Seasonal trades, by their very nature, are oblivious to the current market. Having said that,
lets explain it. A seasonal trade is simply an isolated but specific calendar period during
which a market (or spread) has shown a consistent propensity to move in the same direction
during a number of past years.
MRCI chooses to base its research on the most recent 15 years. Another
publisher of like information begins with as few as 5 years while yet another utilizes as many
as 25 or more. Regardless of the number, the basic philosophy remains the same.
MRCI's seasonal trades are chosen as much as 3 months prior to publication in
the monthly report and as much as 12 months prior to their seasonal entry date in special
reports. Thus, most market analysis made at the time of selection would at best be outdated by
the time it would be most needed. (For the same reason, it would be foolish to make current
analysis the basis for choosing strategies.)
Having said the above, I will finally get to the point of this particular article, which
attempts to answer the following questions:
-
What is on MRCI's web-site that is both current and helpful in making trading
decisions about seasonal strategies and seasonal trading?
-
Is there anything on MRCI's web-site to help someone who does not trade
seasonals analyze the market?
First, I want to tell you what you will not find. You will not find a
recommendation as to whether a particular trade is going to be good or bad. There is a fine
line between research and recommendation: We specialize in the former, we avoid the latter.
Now on to the good stuff. You will find thousands of charts and tables, updated daily or
monthly as appropriate, to complement our seasonal strategies.
Futures Options
For instance, futures options traders can visit the Seasonal Volatility
section, wherein they will find charts reflecting the 15-year average of 20-day historical
volatility, both its central tendency and one standard deviation in either direction. Plotted
against the reference are that contract's current 20-day historical volatility and the relevant
implied volatility. (Note: The implied volatility displayed,
downloaded daily from Commodity Research Bureau, is computed
from the first two out-of-the-money puts and calls).
The benefits? With not only current data for both implied and historical volatility across the
spectrum of markets but also historical reference for the "norm" in both pattern and
level of volatility, futures options traders may more easily identify and exploit "mispriced"
options and abnormal situations, plan strategy, and hedge risk.
Futures
Futures traders of all stripes, styles, and techniques will find treasure in the Seasonal
Correlation, Scenario Analysis, Seasonal Patterns, and Trader's Desk Reference
sections.
Seasonal Correlation charts, updated daily, evaluate up
to 55 years of history against current contracts and statistically determine which previous
years behaved most similarly to the current market. As many as five of the closest years are
then selected, a composite pattern is generated, and the current market is superimposed on it.
The resulting chart thus projects what the market "should" do - provided it continues
to be statistically similar.
Scenario Analysis, with targets updated monthly and status
updated daily, studies up to 45 years of history to determine if and/or when the direction of a
monthly close has been statistically significant. Working under the premise that a market tends
to follow through in the direction of its monthly close, Scenario
isolates calendar months which have shown a reliable tendency to penetrate calculable long-term
price objectives.
Seasonal Pattern Charts, our stock-in-trade and updated
monthly, can be of value even to traders of a non seasonal trading persuasion. This section contains
over 250 charts for over 40 cash and futures markets. First, what are the composite patterns
for the most recent 5 years and for the most recent 15 years? Secondly, what are the patterns
for bull and bear years? In some cases you may look at the bull and bear charts and say to
yourself, "Wow, bull markets go up and bear markets go down! I could tell that without
looking at a chart." The important keys to these charts are, for instance, "Are there
any periods in a bull market which can be bearish?" or "Are there any periods which
can be a tip-off to how the contract will continue to behave?" Even more specifically,
these charts identify previous bull, bear, and flat years.
Finally, almost all of these, and the Seasonal Trade
Review, link directly into the Trader's Desk Reference
section. Here you will find nearly 6,000 historical daily charts of futures and cash markets
for as far back as 1966. If you want to know how T-Bills reacted during the stock market crash
of 1987, you can see for yourself at the click of a mouse. How did gold and silver trade when
the Hunts' tried to corner the silver market in the late 1970s? What did wage and price
controls do to the cattle market in the early 70s? Essentially, pick your market and time period
and go take a look. Or, if you are already looking at a seasonal pattern, a seasonal trade, or
a seasonal correlation, follow the links to see what actually happened in each individual year.
Spreads
Traders can also find Seasonal Spread Correlations as
well. Up to 55 years of spreads are analyzed in the same manner as futures contracts, with the
resultant patterns and relationship to the current spread charted.
New special Daily Spread Files have been added to MRCI Online!
http://www.mrci.com/client/special/
Subscribers simply click on the market(s) of your choice to request
immediate e-mail delivery of a wide variety of spread and major
weekly stock charts.
The basic format for the spread files:
(1) Current spread overlaid on 15-year seasonal pattern,
displayed over the top of the 5 and 15 year seasonal. We look
at the 5-year vs 15-year to identify any significant deviation or
evolution in the patterns.
(2) Correlation study (with any of the last 50 years) if
and when available.
(3) An up-to-30-year monthly continuation chart of the spread
for the big picture.
Potential projects for construction in this section include adding seasonal and Bull/Bear
patterns for spreads. Someday, historicaly daily charts for spreads, like those found in the
hard-copy Traders Desk Reference, may be included.
Leverage
One of the big draws in trading futures versus other investments is the high degree of leverage
attainable. Let's talk about the leverage on a subscription to the monthly that http://www.mrci.com
provides.
By their very natures, the monthly report is static while the web site is dynamic: Most of what
is available in the monthly report is also on the web site - but updated daily! The difference
is between the "snapshot" that is the monthly report and the "movie" that is
web site.
Because the definitions of "space" limitations differ, certain studies can be far more
inclusive and in-depth on the web than in the monthly hard copy. For example, the monthly
report typically presents a total of 11 correlation studies. You can get an idea from the links
on this page how many more can be displayed electronically.
Speaking of electronics, consider the relatively instantaneous availability of all the above.
Consider the time saved by hyperlink connections. Further, consider the ability to communicate
via e-mail rather than by the somewhat slower postal system - and that's if you are within the
US borders. For international customers …
Finally, you will find so much available on the web site for which "hard-copy-only"
customers have to pay extra. Every chart in the Seasonal Patterns Chartsbook ($124) is
on the web. Historical daily charts for futures contracts, otherwise available only in the
eight volumes of the Traders Desk Reference, are at the click of a mouse.
MRCI's web-site, already full of history,
research, and ideas, remains a work-in-progress and a site under construction. We hope all
traders - of futures, spreads, and/or options - find at least something of value. We are
bubbling with ideas of what to add, but we will gladly entertain suggestions. Just
e-mail us!
| *There is a risk of loss in futures trading. |
|
