Seasonal strategies, by their very nature, are oblivious to the current market. How can that be? A seasonal strategy 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. Some analysts might use as few as 5 years, others as many as 25 or more. Regardless of the number, the basic philosophy remains the same.
MRCI's seasonal strategies are chosen as many as 3 months prior to publication in the monthly report and as many 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 Thus, most market analysis made at the time of selection would at best be outdated by the time it would be most needed.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. For the reasons stated above, strategies are chosen "by the numbers" --- optimizing the greatest reliability with the best returns.
With the above in mind, the point of this particular article is 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 better analyze the market with seasonal research?
First, 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. We do not presume to know any more about what the market will do than anyone else.
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.
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 traders of all stripes, styles, and techniques will find treasure in the Seasonal Correlation, Futures & Cash Charts, Seasonal Patterns, Scenario Analysis and Trader's Desk Reference sections.
Seasonal Correlation charts, updated daily, evaluate up to 55 years of history against the market behavior of current contracts and statistically determine which previous years behaved most similarly to that current. 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 if it continues to behave in a statistically similar manner.
MRCI's Futures and Cash Charts offer convenient, flip-through files containing daily and monthly charts of the underlying cash and of several nearby delivery months for a futures contract or complex. To help you become even more familiar with how the current market is behaving now compared to the past, each daily chart is not only overlaid with its 15-year seasonal pattern but also shows the 5-, 15-, and up-to-30-year seasonal pattern below. To help you project a market's potential, any correlation patterns available are also displayed. Thus, in one easy-to-use file, you can see a market's past prices, compare its present behavior, and visualize its possible future.
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.
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.
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 --- or even more. 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 correlation study, follow the links to see what actually happened in each individual year.
Traders can also find Seasonal Spread Correlations. 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.
Special Daily Spread Files have been added to MRCI Online!
Subscribers simply click on a market or complex of choice to request the PDF or else immediate e-mail delivery of an array of spread charts. The basic format for each spread in these files:
(1) Plot of the current spread overlaid with its 15-year seasonal pattern, with both the 5- and 15-year seasonal patterns displayed below (the 5-year vs 15-year can help one identify any significant deviation or evolution in trading patterns);
(2) An up-to 30-year monthly continuation chart to see the big picture; and
(3) A study of any correlation with any of the last 50 years.
One of the biggest draws in trading futures versus other investments is the high degree of leverage attainable. But what about the leverage a subscription to MRCI Online provides?
First, the hardcopy monthly report is static whereas MRCI Online is dynamic. Most information available in the monthly report is also on the web site --- but it is updated daily! The difference is between the "snapshot" that is the monthly report and the ongoing "movie" that is the web site.
Secondly, because definitions of "space" limitations differ, certain studies can be far more inclusive, in-depth, and wide-ranging on MRCI Online than in the monthly hard copy. For example, the monthly report typically has spaced to present only 11 correlation studies. You can get an idea from the links on this page how many more can be displayed electronically.
Thirdly, consider how relatively instantaneous all of the above are available. Consider the time saved by hyperlink connections. Consider the ability to communicate electronically via e-mail rather than through time and space via the postal system --- and that's if you are within US borders. International customers can obtain even greater leverage on their time .
Finally, so much more is included on the web site for which "hard-copy-only" customers have to pay extra. Every chart in the Seasonal Patterns Chartsbook ($124) is available on the web, and updated when appropriate; and historical daily charts for as far back as we have data are available only on MRCI Online.
MRCI's web-site, already full of history, research, and ideas, continues to be a work-in-progress, always with an eye toward serving our clients better than before. We trust all traders --- whether of futures, spreads, and/or options --- find something of value to help better their own trading. We are constantly searching for ideas of what to add, and we will gladly entertain suggestions. Just contact us!