Giles Coghlan LLB, Lth, MA
Financial Source
One of the key features around seasonality is the so-called turn-of-the-month effect. This is when major indices tend to gain around the end of a month and into the first few days of the new month. However, using Seasonax you can also look at the seasonality for indices around the middle of the month which can show some surprising seasonal biases.
The Nikkei, for instance, has a 60% bias towards winning trades on the first two days after the third of the month. The average return is 0.29% of the average profit is 52.52 points. In the next 5 days after the turn of the month, the winning percentage remains around 60% with the average return increasing to 0.41%. With investors having been turning positive on Japanese stocks earlier this year, will the outlook for the Nikkei be positive around the turn of the month?
Major Trade Risks: The major trade risks here would be further talk of the BoJ exiting negative interest rates which can strengthen the JPY. A strong JPY is a natural headwind for Japan’s export-heavy Nikkei.
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