How to Trade the Summertime Blues VIEW IN BROWSER BY LUCAS DOWNEY, EDITOR, TRADESMITH ALPHA SIGNALS “They should just close the stock market in August and reopen in September.” My colleague Louis Navellier once told me that… and he’s right. If you’ve been in the business for any number of years, you’ve learned how nasty the summer months can be. Low-liquidity environments are ripe for wider bid/ask spreads… and heightened volatility. It doesn’t surprise me one bit that President Trump’s tariffs are the latest excuse to take profits. And I told you about this repeatable summertime blues pattern just two weeks ago. As I highlighted then, we’re in the midst of the stock-market gauntlet. And that means just about all stocks will struggle and behave differently than in months past. But that’s OK… if you’re prepared! Today, we’ll take our seasonal study a step further, looking at different market-cap sizes. If your portfolio is bruised right now with the S&P down nearly 2% as I write this… you’re not alone! Cheer up. Better days lie ahead. I’ll even show you a great name to scoop up in the downdraft. Recommended Link | | | | Eric Fry is breaking ranks with Wall Street by saying “Sell Nvidia.” Because history, he says, is repeating itself. In 2000, Eric Fry told Barron’s that folks should sell one of the dot-com boom’s most beloved stocks right before it fell more than 90%. Now, he says investors need to replace Nvidia stock with a much better alternative – before their money is wiped out. Get the details here – including free tickers and analysis. |  | |
Summertime Blues Kick in Right on Cue It’s been a spectacular few months. After the S&P 500 produced monster gains of 6.2% in May, June and July added another 7.2% total gains. Remember back in early June, we discussed how big Mays bring strong June and July returns. Hopefully your portfolio participated in that upside. But August has started to change course. Below you can see how the S&P 500 cruised the last three months. I’ve circled August’s notable pullback: 
The pullback is notable because we haven’t had a daily move up or down 1% in 27 trading sessions. Even more, it’s been 33 sessions (going back to June 13) since we’ve seen any move to the downside greater than 1%. Remember, this shouldn’t come as a surprise. August and even September are notable for market weakness. To add to our prior signal study, I went back to 1990 and plotted the June and July performance for the S&P 500, Nasdaq 100, and Russell 2000. Notably, they all tend to skew positive. But August and September see the S&P 500 fall -1.3%, the Nasdaq 100 drop -0.1%, and Russell 2000 slide -0.9%, on average: 
However, my message from two weeks ago remains the same. You want to be looking for deals to scoop up during this downdraft because Q4 is historically a very low period for all stocks. This study should prove that just about all stocks feel pressure during the dog days of summer. So if your portfolio is sagging, that’s par for the course! Just don’t miss out on what’s coming later in the year… One Stock Set to Cruise Higher in 2026 With a buy-the-dip scenario staring at us, we should focus on best-of-breed companies. That means, isolate growing businesses that are easy to understand. Back in February, I discussed betting on the consumer with a trade idea in Royal Caribbean Cruises (RCL). I’m sure you’re familiar with the iconic cruise liner, which occupies brands like Caribbean International and Celebrity Cruises. This is a fast-growing enterprise with revenues expected to reach $18 billion in 2025. That’s up 9.2% from the prior year. More impressive is the bottom line. Net income in 2025 is slated to reach $4.3 billion, leaping from $2.9 billion in 2024. Profitable, easy-to-understand businesses often offer good ideas. Here’s the chart with RCL shares up 37% year-to-date: 
The latest share slide is right on cue with the overall markets in late July and early August. Even with shares up 22% since I mentioned it in February, I still like it for a trade idea. Here’s why. I went back to 1993 and found that June and July average a solid 2% gain for RCL shares. Even better, August through September sees a ramp of 3.6%. And October through December averages a powerful 13.9% performance: 
If this doesn’t excite you, I’ll take it a step further. By utilizing TradeSmith’s Seasonality Tool, we can clearly see when this seasonal upmove kicks off. By analyzing the last 15 years, our software pinpoints Aug. 27 as the optimal time to lean long through Nov. 15. 
Let’s drill down on that green zone off to the right. You’re looking at an average gain of 18% from Aug. 27-Nov. 15. Incredibly, only 2018 saw negative returns: 
To round this out, RCL also sports one of the highest Quantum Scores, around at 81. Very few companies score well both fundamentally and technically… this TradeSmith tool seals the deal for me: 
Listen, your portfolio is taking a breather… it’s normal. Seasonal weakness affects just about all stocks of all sizes. Remember, though, the summertime blues won’t last forever. Ballast tends to hit in Q4. So, play for the rebound! That’s how you win. Be choosy. Focus on high-quality companies with big earnings growth. Those will sail to higher heights later this year. That’s the winning ticket. Regards, 
Lucas Downey
Editor, TradeSmith’s Alpha Signals | 
0 Response to "How to Trade the Summertime Blues"
Post a Comment