SEASONALITY IN AUGUST WHAT TO BUY?

Hello to all Enbolsa.net followers.

Today we are going to carry out a seasonal analysis of the European and American markets.

We have carried out this analysis through the information provided in the seasonality report  prepared by Enbolsa.net monthly.

To carry out this study we have taken into account what happened in the markets in the time period of the last 20 years in which a series of statistical studies of probability have been carried out. This series of studies shows that there are more interesting times of the year to invest than others. By observing the seasonality of world indices we can quickly realize that this August is very likely to be bearish in world indices.

When selecting among the different indices, we will look for those that have a positive return and a probability of being bullish, or those that have a negative yield and a low percentage of bearish months.

During August, the most bullish indexes are the PSI20, the ALL ORDINARIES and the IBEX TOP DIVIDEND. While the most bearish are the Swiss index, the CPI and the Latibex.



Once we have studied the different stock indexes we will go on to carry out a study of American industries and sectors.

In the first place, we will determine which are the ones that have higher or lower probabilities of going up and then select those industries that show yields according to their probability.

The following graph shows the probability of being bullish in each of the industries.



The industry with the highest probability of falling would be that of automobiles, telecommunications and basic materials with a probability of success of 32.75%, 36.26% and 42.11% respectively.

While the industries that are most likely to rise in the same period would be the utilities, personal assets and media industry, all with a probability of rising below 42%, except for the utilities industry which stands out with its high Chance of being bullish of 74.85%.

The table below shows the North American industries ordered by average profitability obtained, with their respective probability of success.



When observing the average profitability achieved, we realize that most industries have a negative profitability in August.

Given that the probability of being bearish is greater than that of being bullish, in addition to the fact that the yield obtained would be negative for almost all industries, the best option is to position yourself short in the US market.

In this way, taking into account the performance obtained and the probability of ascent, we will choose the automobile, telecommunications and basic materials industry.

Meanwhile, in  Europe  , as has been done in the North American market, first locating the industries most likely to rise and fall, to later make the comparison of this probability with their average yield obtained. The following graph shows which are the industries in  Europe  that are most likely to be bullish.



The industry with the highest probability of rise would be telecommunications, food and beverages and utilities with a probability of success of 73.10%, 65.5% and 64.33% respectively.

Meanwhile, the most bearish are banking, insurance and car and spare parts with a probability of being bearish above 60%. The table below shows the European industries ordered by average profitability obtained, with their respective probability of success. When observing the average profitability achieved, we realize that almost all the industries in  Europe  have negative returns in August.

Given that the probability of being bearish is greater than that of being bullish, in addition to the fact that the yield obtained would be serious for the industries is negative, the best option is to position itself short in the European market.

Once we have determined that August is a basically bearish month, we will conduct a search for values ​​that meet the requirements of being in a downtrend, bearish momentum and weakness and that also belong to the aforementioned industries.