• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Evaluating Risk is a Key Difference Between Successful and Unsuccessful Traders
Stock

Evaluating Risk is a Key Difference Between Successful and Unsuccessful Traders

by February 25, 2024
by February 25, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

This secular bull market advance is running over everyone attempting to get in its way. It’s why I always say never to bet against one. Trying to short this type of bull market is the equivalent of financial suicide. I usually have music playing in the background while I’m working and, on Friday, as the stock market closed, Elton John’s “I’m Still Standing” started playing. I thought, “WOW, this is timely!” EVERYTHING has been thrown at this secular bull market and it’s still standing, “better than it ever did.”

Resiliency is a key element of bull market moves and we’ve certainly witnessed that. But, bull market or not, we absolutely should lower our bar of expectations right now. I would definitely remain fully invested, but just try not to grow too bearish when we inevitably enter a period of consolidation or (gasp!) selling. The first half of calendar quarters 1-3 is historically MUCH more bullish than the second half of calendar quarters 1-3. During the current secular bull market that began in 2013, here’s the S&P 500 breakdown by annualized returns by calendar quarters 1-3:

1st half of calendar quarters 1-3: +18.14%2nd half of calendar quarters 1-3: -3.37%

That’s a very large discrepancy in performance and it’s calculated over 11+ years of data. We know what’s been driving our major indices higher. It’s been the Magnificent 7 and friends. In a 70-page Seasonality PDF that I’ve offered to everyone on 16 of the largest market cap companies, a TON of seasonal information was shared on each. Following the theme of 1st half vs. 2nd half of calendar quarters, let me share with you the annualized returns for both halves for each of these 16 companies:

1st Half of Calendar Quarters 1-3:

AAPL: +50.54%MSFT: +37.67%GOOGL: +50.42%AMZN: +51.51%NVDA: +75.63%META: +56.44%TSLA: +62.69%AVGO: +18.26%COST: +25.50%ADBE: +33.82%CSCO: +18.85%AMD: +72.48%NFLX: +47.21%INTC: -1.11%AMGN: +21.81%SBUX: +17.13%

2nd Half of Calendar Quarters 1-3:

AAPL: +9.52%MSFT: +12.35%GOOGL: -8.70%AMZN: +13.29%NVDA: +47.80%META: +8.93%TSLA: +40.41%AVGO: +40.21%COST: +9.64%ADBE: +20.37%CSCO: +2.69%AMD: +26.77%NFLX: +19.45%INTC: +13.98%AMGN: +2.52%SBUX: -4.05%

Of these 16 stocks, only AVGO and INTC perform better during the 2nd halves of quarters.

I deliberately ignored Q4, because this quarter has a long history of seeing considerable strength during both halves. But in quarters 1-3, we should simply recognize the historical patterns and be sure to lower our expectations, especially after such a significant rally since late-October 2023.

We’re still seeing a “risk on” market environment, which favors the bulls. If we begin to see relative strength in more defensive sectors, that could be the signal to perhaps take on less risk. Using StockCharts.com’s seasonality tool, we can compare defensive utilities (XLU) vs. ultra-aggressive technology (XLK) since 2013:

Utilities don’t outperform technology very often, but it seems to happen somewhat frequently in the 3rd months of calendar quarters. Check out March, June, September, and December above. March is the best calendar month for XLU outperformance vs. the XLK. But the second months, February, May, August, and November, favor technology in a HUGE way!

Now let’s look at consumer staples (XLP, defensive) vs. consumer discretionary (XLY, aggressive), using the same seasonality chart since 2013:

Again, it’s the third months of calendar quarters where defensive areas show some relative strength and the second months where we’ve seen MASSIVE relative weakness. We need to recognize these seasonal patterns to become better traders, knowing when it’s appropriate to take on more risk…..and when it’s not.

Based on all of this, it seems rather prudent to me to be a bit more cautious now. I’m not at all saying that our major indices are primed for a big fall. Instead, I’m simply pointing out that we’re in a time of the year when risk does escalate. It’s up to each individual as to what that might mean in your own trading and/or investing.

By the way, I am still offering the “Bowley Trend”, our seasonal PDF, for FREE. CLICK HERE and claim your copy!

Happy trading!

Tom

You Might Also Like
  • Shopify Stock Shatters Expectations: What You Need to Know About Its Rise
  • Confused by the Market? Let the Traffic Light Indicator Guide You
  • The Ord Oracle June 19, 2023
  • NVDA at a Crossroads: Decoding the Signals From Atop a Cloud
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Nikki Haley bets it all on Super Tuesday after dismal primary night down south
next post
Biden’s vision for a Palestinian state doomed, experts say: ‘An explicit recognition of Hamas’

You may also like

Are We Staring At A Technical Rebound On This Metal...

March 1, 2023

Every One of These Breadth Conditions are SCREAMING Risk On!

August 31, 2023

Technical Indicator Showdown: MACD vs. PPO vs. PMO

May 24, 2024

Stay Ahead of the Markets with AUTOMATED Portfolio Reports

April 13, 2024

Volatility ($VIX) May Be Providing Clues of a Big Market...

February 3, 2025

Big View Slaps Bulls with Warnings

November 29, 2023

Value Stocks Continued Strength Might Depend On One Area Of...

January 26, 2024

Double Tops on Bitcoin and the Dollar

February 14, 2025

Useful Directional Indicator Criteria for Your Success as a Trader!

December 7, 2023

DP Trading Room: Equal-Weight Losing Against Cap-Weight SPY

June 10, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • OpenAI to release web browser in challenge to Google Chrome

      July 10, 2025
    • Sports executive charged with bid-rigging in Texas arena project

      July 10, 2025
    • How I Triple My Returns With 3x Leveraged ETFs!

      July 10, 2025
    • Want Faster, Lower Risk Trades? Use This Setup

      July 9, 2025
    • The Seasonality Trend Driving XLK and XLI to New Highs

      July 9, 2025

    Popular Posts

    • 1

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 3,630 views
    • 2

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,919 views
    • 3

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,607 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,576 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,449 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,169)
    • Investing (538)
    • Stock (2,661)

    Popular Posts

    • 1

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 2

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 3

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • OpenAI to release web browser in challenge to Google Chrome

      July 10, 2025
    • Sports executive charged with bid-rigging in Texas arena project

      July 10, 2025
    • How I Triple My Returns With 3x Leveraged ETFs!

      July 10, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,169)
    • Investing (538)
    • Stock (2,661)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    The Best Five Sectors, #2

    January 10, 2025

    Art and Science: 3 Key Ratios...

    March 24, 2023

    Disney Stock: A “Small World” Worth...

    February 9, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here