It seems as thought the season of seasonal trading strategies is upon us. I am seeing quite a few different seasonal trading posts being published on a number of different quantitative trading blogs lately. The most recent one that stood out to me was by Jay from Jay On The Markets.

Jay’s strategy segments the best market seasons with the best market sectors and uses a MACD signal to enter and exit.
In his Seasonal Sector Trading System post, Jay takes an idea inspired by The Stock Trader’s Almanac and attempts to build a trading system out of it. He takes the almanac’s concept, adds a MACD timing signal, and then trades that strategy on sector-based funds. Here is how he explains it:
One system that I follow involves using the Almanac’s “Nasdaq’s Best Eight Months Strategy” with MACD Timing. However, instead of buying a stock index I focus on the top performing Fidelity Select Sector Funds.
Trading Jay’s system starts by tracking the MACD indicator using the values 8/17/9 on the Nasdaq Composite Index on October 1. A buy signal is generated when the fast line crosses the slow line. The next step is to identify the top performing sectors:
Then find the five top Fidelity Select sector funds. There are a number of different ways to do this. The method I use is to run AIQ TradingExpert Relative Strength report over the past 240 trading days. This routine looks at the performance off each fund over 240 trading days but gives extra weight to the most recent 120 days. You can use different variables, or you can simply look at raw price change over the previous 6 months to come up with a list of “Top Select Sector Performers.”
Once Jay identifies the top five sector funds, he purchases them the next day. I assume he buys them at the open and allocates 20% of his capital to each position. He then holds that position at least until June 1.
Starting on June 1st of the next year, track the action off the MACD indicator for the Nasdaq Composite Index using MACD parameter values of 12/25/9.
When the fast line crosses below the slow line – or if the fast line is already above the slow line on 6/1, then sell the Fidelity Select sector funds on the next trading day.
Jay backtested this strategy starting on October 1 of 1998 all the way through its exit in June 2013. Over that period, Jay’s system produced positive returns 14 out of 15 times. It also outperformed buying and holding the SPX during the same time periods 11 out of 15 times. Over that 15 year period, Jay’s system averaged a return of 14.1% and its worst year was -0.8%.
As you can see, this relatively simple system has registered a gain in 14 of the past 15 “bullish” eight month periods. On average it has outperformed the S&P 500 by a factor of 2.27-to-1.
Jay concludes his article by reminding us that while this strategy has outperformed a buy and hold approach on average for the past 15 years, that certainly does not guarantee that it will continue to be profitable this year.