July 15, 2010: A History of Julys
July 15th, 2010
As the broad markets are enjoying a very strong July thus far, we wanted to look at the history of July performance for the S&P 500. What we found is that July rallies are quite common but so are very sharp negative reversals.
We looked at performance from June closes to July closes, June closes to July highs, and July highs to July closes going back to 1990. Some of the findings were rather surprising and strongly argue for at least some measure of pull-back before the month is over.
· In every year of the sample (twenty years), July highs were equal to or higher than June’s close.
· Eleven of those twenty years saw July’s close below June’s close by an average of 2.57% with the largest negative reversal being 7.90% (2002)
· In six of the past fourteen years, there has been at least a 5% pull-back from July’s high to July’s close. The largest of which was 8.33% (2002)
· The average pull-back from July’s high to July close has been 2.85%.
· Average July performance for the past twenty years is +0.32%. Currently, the index is +6.25% for the month.
· July 2009’s performance was +7.41% which was the strongest July in the sample. Second strongest July was +6.80% (1997)
Based on July’s performance over the past twenty years, if the index was to match the strongest July (full month performance) in the sample, that would take the index to 1107. Further, if the index was to match the strongest move from June’s close to July’s high in the sample, that would take the index to 1117. We view those levels as key areas of resistance.
Conversely, if the index was to match the average performance for July over the past twenty years, (+0.32%), that translates into SPX 1033 (down -5.6% from its current level).