March is the crazy month

According to some of our proprietary research, March is an outlier month.

Without going into too much detail, we have found that the month of March historically behaves in an unexpected, atypical manner. This has compromised otherwise solid systems to the point that we simply do not trade some systems only during the month of March. March has produced significant turns in long term trends historically, including the top in March of 2000 and the ensuing final bottom in March of 2003. A significant bottom was made in late March of 1994, which launched the market into the massive bull that ended in 2000.  Many other minor trend changes also occur frequently in the month of March.

Various explanations have been offered for this phenomenon, including the Ides of March.  One cannot discount the cultural and religious significance of the March equinox either.  While we are certain the cause is a number of factors, one that seems to stick out to us is the timing for the end of the first quarter. Many things are happening around this time of year from a fundamental standpoint including closing the books on the first quarter, which not only sets the tone for the new year, but in many cases finalizes budgets also.  Fourth quarter and end of year earnings are being reported around this time to the public as well.  More importantly, it is the first triple-witch expiration of the year.  Recently, this has become quadruple-witching with the addition of Single Stock Futures (SSFs), but historically it has been a triple-witch event.  This event alone is known to cause weird things to happen, so much so it is called “freaky Friday” as it occurs on the third Friday of March, June, September & December.

Whatever the reason, if you feel something strange or think that people are just being crazy, it could be true.  Whether the cause is internal, external, fundamental or fabricated is not nearly as important as how you prepare yourself.  Be aware and alert.  Take advantage of the situation or just sit it out.

Please share any March experiences or planning that you have in the comments section below.  I know I am missing many things and will come back to this note as I come across or remember them.