Technical Indicators

Seasonality Indicator

TOGGLE’s seasonality indicator shows you the performance for the upcoming month or quarter, based on the performance in the same period for the last 5 years.

This indicator is relevant across asset classes, and used for example to predict movements in very seasonal commodities such as soybeans.

Equities tend to show seasonal patterns too, for a series of reasons. The earnings season provides a recurrent driver to the market. And regular events like quarterly and year-end rebalancing further fuel regularities in price patterns.

Investors can use seasonal patterns to gauge price movements in a specific period of time, based on an asset’s historical performance. However, one should be aware of the broader environment as seasonal factors can become less relevant in the presence of large economic shocks or big market trends.

For example, looking at the JETS ETF (which provides investors with exposure to the global airline industry), taking into account the last 5 years of data, seasonality shows that this industry historically returned ~8% over the following 1M, from Feb 1st. Why you might ask? High demand for flights as people take short holidays to celebrate the start of spring/ escape the cold.

JETS 1M forward Seasonality

A measure of seasonality is the AAII Investor Sentiment Survey, which has been reported every week since 1987.

The survey is used to showcase the mood of individual investors - with weekly results published in Barron’s, Bloomberg, and widely followed by market strategists.

AAII Members are asked: what direction do you think the stock market will be in the next 6 months?

AAII investor sentiment survey

A bearish AAII Sentiment indicator is a good gauge of the overall market sentiment - is consensus getting too bearish, exposing investors to a possible positive surprise? On the other hand, a bullish AAII Sentiment indicator is a good gauge of the overall market sentiment - is consensus getting too bullish, exposing investors to a possible negative surprise?

Seasonality Indicator

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