This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

July Seasonal Strength May Give Great Trades -- So Get Ready Now

NEW YORK (TheStreet) -- July is here, and trading activity should die down as money managers go on vacation after their late-June portfolio rebalancing. That leaves us with the typical July market: there is usually lots of bullish action in momentum and speculative names.

Despite the possibility that the averages may not do much, I have mostly had great success in the seasonally strong period, starting around July 4 and ending around mid to late July. Afterwards the markets typically quiet down during the August doldrums through Labor Day.

Let's look at the Marty Zweig model for how to profit on this seasonal shift.

Audi '15 A8 Is a 868-Mile-Range Tesla-Killer, and Diesel Is the Secret

Bullard: A Hawk at the Fed?; Parsing Markit Data: Best of Kass

Six Flags Rewards Investors Post-Bankruptcy

The Martin Zweig Model Would Probably Still Be Cautiously Bullish

The conditions for higher prices in the short run remain bullish unless further shocks like war, rising oil prices, etc., shake things up.

Marty Zweig was, in many people's view, the greatest market prognosticator of them all. If Zweig were still alive today, I believe he would say that the odds favor the bulls.

Zweig's stock market model was comprised of three components. Right now two out three of those components are bullish. I list them in order of importance in the model's weighting.

1. Federal Reserve policy, which is still simulative, despite the tapering.

Zweig famously coined the term "don't fight the Fed." Score one for the bulls -- although the quantitative easing policy was not in play during Zweig's day.

The true test of a potential change in monetary policy will come in the fall, when the taper ends and the Fed must decide whether to perform another round of QE or not. Until then, and unless Janet Yellen says something about Fed tightening, monetary policy is still bullish.

2. Market momentum, which is clearly bullish.

The market has been over its 200-day moving average for a record 402 days. Pullbacks over 5% are rare, and stocks are resiliently grinding higher.

3. Market sentiment, which is terrible -- it's at historically euphoric levels.

From the put/call ratio, which Zweig invented, to historically low bull/bear ratios, things are too giddy. Thus this looks bearish.

Milton Friedman Would Say Long Term Risks Abound

The thought of making money in an extended mature market during such precarious economic times sounds crazy.

In my last article, I posited that the monetary policy of the world's central bankers is producing poor, sputtering economic recoveries. Worse yet, inflation is starting appear.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs