The Dines
Letter's Seasonalities:
July and the "traditional Summer Rally"?
By James Dines, editor
The Dines Letter
Some
define the "traditional Summer Rally" as any advance
from the low established in May or June, to the high reached
during the third quarter. On this very liberal basis, 35 of the
past 38 summers (92% of the time) have enjoyed a rally (the three
exceptions were 1966, 1969, and 1981). Other Analysts have tightened
this definition to a "net gain from May 31 to Aug 31,"
which still comes out to 61% (23 out of the 38 years).
Contrarily, we have
been tracking this area closely over the years and, taking July
as a month, the actual record since 1963 has not been encouraging
as the legend. As we count the last 38 Julys, 19 were positive
(50%) and 17 (45%) were negative (two neutral), so there is
no clear July Seasonality (although it might be worth mentioning
that the neutral years of 1964 and 1972 led to good advances
in subsequent months).
So our hard-working
Research Department then experimented with something new. They
counted up the number of times the month of June was down (20)
in the last 38 years, and discovered that their subsequent Julys
were up 13 times and down 7 times, thus indicating that declining
Junes led to rising Julys twice as often! A down June increases
favorable odds for a bullish July!
Curiously, Research
discovered no corresponding Seasonality for rising Junes having
favored declining Julys. Therefore, since this June 2001 looks
as if it will be a downer, the odds are increasing for a rally
in July.
Then our Research
Department tallied the DJI's closing price five days before
the 4th of July Holiday as compared to the DJI close five
days after the 4th of July: in the 38 Julys from 1963
to 2000, the net percentage gain in the DJI for that 10-day period
was positive 25 times. The 25 positive results (66%) in any case
is more bullish than its record for the whole-month period (which
is 50%, as indicated above). The foregoing TDL Seasonalities
alone suggest that seasonal percentages favor a rally in early
July and then somewhat lower prices in August.
Golds and Silvers:
The Dines Gold Stock Average (DIGSA) in the last 33 Julys has
risen 14 times, declined 18 times and was neutral once, for a
bearish outlook 56% of the time. The Dines Silver Stock Average
(DISSA) has risen 18 times and declined 15 times, for an unexcitingly
55% bullish silver Seasonality. No strong Seasonalities.
Editor's Note: James
Dines is editor of the highly regarded The Dines Letter,
P.O. Box 22, Belvedere, CA 94920, 1 year, 17 issues, $195.
