One of the very first trading books I bought back in the 1990’s was the Schwartz Stock Market Handbook. The reason for the handbooks enduring popularity, then, as now, is that it provides factual investment insights and helps as a guide through the year, month-by-month and week-by-week. No opinions. No guesses. Just solid facts about the UK stock markets most significant index the FTSE100 (UK100). The books author (David Schwartz) was a historian, and statistician by training and he provided the analysis of closing prices all the way back to World War I when modern stock market record-keeping began. He was one of the first to debunk the idea that the equity markets (and by extension all markets) were completely unpredictable and no one knew where prices were heading. The clear fact is that is NOT the case. Following trends over long periods and the long term there are vast troves of evidence to show the predictability of markets. At times it needs a wee jiggle of the data and to view things from a different perspective. Unsure whether to enter a trade or not ? – try turning your charts upside and ask yourself would you take the opposite trade to the one you about to place? It can either confirm your original thought process or keeps you out of the trade. Schwartz called these opportunities his Pockets of Predictability and yesterday, June 6, was one of these hard and fast facts.
Equity markets over the long term tend to rise, even adjusted for seasonality and inflation. Fact. The odds of a price rise for the UK100 on any individual day of the year is around fifty two percent (52%). Yet some days are much better than average and have been for decades, the best of the best is ………June 6 which rises seventy seven percent (77%) of the time. No one really know why June 6 is so profitable but it is and has been since 1935. Yesterday was no different, the cash market opened at 7686 and closed the day at 7712 for another June 6 gain. Four of the last five years June 6 has been an up day for the UK100. 2015 June 6 fell on a Saturday.
As for the worst performing day of the year? That is yet to come and more closer to the day. Trade what you see and not what you think is an old trading cliche but as true today as ever it was add that to historical probability and you have tipped the odds a little in your favour. Always respect and protect your Capital and always watch your Risk Management.
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