What are the seasonal trading trends in November
I'm a bit late this month with the seasonal rundown but it's been a sluggish start to the month so you probably haven't missed anything.
It's a month with a few very-notable seasonal biases that you may want to keep in mind. I've got a few of them.
If you want to see how the seasonals did in October, here is the scorecard.
1) US dollar strength
It's the second-best month over the past decade for the US dollar index and the Bloomberg dollar index (May is best). The DXY averages a 1.37% gain and is up in 8 of the past 9 Novembers. It hasn't been a great start with the US dollar slumping in the aftermath of the Fed but dollar bears may want to wait a bit longer before pulling the trigger.
2) USD/JPY strength
Drilling down deeper into the US dollar story, the place to bet is USD/JPY rather than against the commodity currencies. This pair has averaged a whopping 2.3% gain in the past decade, which is almost double the second-best month.
3) Japanese stocks
The Nikkei 225 has averaged a 3% gain in the past decade and is up in 7 straight Novembers. It's easily the best month of the year to own Japanese stocks but you might want to hedge the yen exposure because the strength in USD/JPY goes hand-in-hand with this move. It's also a very good month for the S&P 500.
4) Oil is a laggard
The late-year tendency for oil weakness is something I highlight year after year and it came through in a big way last year with a monumental Oct-Dec decline. November is the worst month on average over the past decade but this trade requires a healthy amount of risk management because there have been a number of big swings in both directions. The good news is that I'm a day late with this seasonal idea so the 3.7% rally to start the month is one bullet dodged. With the weakness in oil, CAD is also a bit of a laggard.
5) The natural gas rally continues
I highlighted this trade last month and it's a two-parter. The average gain in gas in November is 5.5% over the past decade. I would warn that there is also some tricky volatility in this one. I checked at how well the trend continues if there's a October rally and there isn't any meaningful correlation over the past 20 years.
6) EUR/GBP weakness
I think there is way too much Brexit risk to be putting on any kind of a GBP seasonal trade but note that over the past 10 years, EUR/GBP has been soft. It's the worst month on the calendar for this pair over the past decade and the average loss is 0.87%.
