Friday, September 21, 2012

Time for Energy to Run Out of, Well, Energy?


With all of the turmoil in the Middle East one might naturally expect energy prices to be soaring at the moment.  But they are not.  If you followed seasonal trends in the financial markets (and I’m guessing that you don’t) then you would not be surprised (and I’m guessing that you are) that energy futures and energy stocks are falling sharply at the moment.  So what gives?  In a word, “seasonality”.

Two Unfavorable Periods for Energy Stocks
For our purposes we will use Fidelity Select Energy Services (ticker FSESX) as a proxy for energy stocks and will look at two seasonally “unfavorable” periods:
-The first seasonally unfavorable period extends from the close of September Trading Day #10 (in this case, September 17, 2012) through the close of October Trading Day #6 (October 8, 2012).
-The second seasonally unfavorable period extends from the close of November Trading Day #2 (in this case, November 2, 2012) through the close of November Trading Day #14 (November 20, 2012).
The performance of FSESX during these two periods since 1988 appears in Figure 1
 
Figure 1 – FSESX % +/- during Seasonally Unfavorable Periods
For the September Trading Day 10 through October Trading Day 6 period:  (more)

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