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April - One of the best months of the year?

Many investors understand the historically favorable periods in the stock market is from November to April. The best six months strategy or commonly referred to as Sell in May and Go Away, suggests investors perform well when buying the stock market on November 1st and exiting the market on May 1st of the following year.

Yes, April is the final month of the best six months of the year before the arrival of the worst months. However, contrary to popular belief, April is not the cruelest month of the year.

Surprisingly, April ranks as the second-best month of the year for the S&P 500 Index (SPX) over the past twenty (20) years.

The best months are July (2.2% average gains), April (2.0%), November (1.8%), October (1.1%), March (0.9%), and December (0.7%).

Also, April shows the highest percentage of months in which SPX has closed higher than it opened at 79%. It exceeds the traditional favorable seasonality months of November (74%) and December (68%).

After spending the bulk of the first quarter in a trading range between 3,750-3,800 and 4,100-4,200, the question is whether March 2023 marks another SPX higher lows (3,808.86 – 3/13/23) above Dec 2022 low (3,764.49), and the pivotal Oct 2022 reaction low (3,491.58).

Can April’s historical track record help to stabilize a tumultuous first quarter and help to extend the stock market recovery?

It is encouraging SPX has broken out above its Jan 2022 primary downtrend and is attempting to reclaim the 50-day and 200-day moving averages at 4,014 and 3,932, respectively.

If this trend continues and market internals improves, can the Oct 2022 recovery extend into April before the start of the seasonality slow periods from summer months to early-Fall?

Sector and stock selections remain crucial to outperforming the market (SPX), at least from a relative perspective. A tactical approach tends to work best in a neutral trading range environment.

Until SPX regains its primary uptrend, a top-down investment strategy is the preferred choice. First, choose a relative strength market. Second, select the best sector. And then pick the right stock.

Enclosed are the eleven (11) S&P sectors ranked by performances for April over the past twenty (20) years:

Energy – XLE (+2.5% and 63% of the time has risen)

Real Estate – XLRE (+2.1% and 53%)

Consumer Discretionary – XLY (+0.9% and 63%)

Financial – XLF (+0.7% and 42%)

Communication Services – XLC (+0.6% and 67%)

Materials – XLB (+0.6% and 53%)

Industrial – XLI (+0.1% and 53%)

Utilities – XLU (-0.2% and 58%)

Technology – XLK (-0.3% and 37%)

Healthcare – XLV (-0.4% and 53%)

Consumer Staples – XLP (-0.6% and 42%)

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