Seasonals: Quick hits on what's strong and weak in February

Technical Analysis

Author: Adam Button | february

A look at February trends

The earth-shaking political moves are behind us and while all the meme-stock mania doesn't make it feel like a 'normal' market, I think it's a good moment to take into account the seasonals.

Here are some of the trends:

1) It's the start of a strong run for oil
Oil seasonals
February is the best month of the year for oil over the past 20 years, averaging a gain of 4.4%. Last year bucked the trend but that was on worries about demand as covid was spreading in China, and then elsewhere. Notably, the period of strength lasts until July and oil is already in a nice uptrend, bucking plenty of negative news and headlines in Q4.

2) The end of the gold run
Gold seasonals
I always highlight buying gold in December in anticipation of the run through February. Lately, I believe gold is being front-run early in the period and sold in February. Today is a decent pop for gold but I'd be wary of chasing it too deep into the month.

3) Cable creaks
GBPUSD seasonals
I'm tempted to ignore the charts in cable for the past few years because Brexit was such an overwhelming story.  All that said, February is the third-weakest month over the past 20 years and there was plenty of softness there pre-covid. In the bigger picture, I believe GBPUSD is in a long-term bull market so the two options are long or the sidelines. So the trade would be to find a dip in February to buy. With the weakness in GBP, it's also the second best month for EUR/GBP longs.

4) AUD strong period
AUD seasonals
The Feb-April period is generally a good one for the Australian dollar, albeit the trend has been weak lately. The RBA is a few hours away and that will set the stage for what's next. If they hint at dialing it back, there's plenty of room on the upside.

5) Stock watch
Nikkei seasonals
If you go back to 1920, February is the second weakest month for the S&P 500 and that's particularly true in the first year of the Presidential cycle. That said, I tend to thing long-term seasonals are less important than the past 10-20 years. There's a great stretch of strength in the Nikkei 225 from now through April.

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