April seasonals review
We are into the final hours of April trading and unfortunately the longer-term trend of low FX volatility didn't end this month.
However there were plenty of ways to make money and one of them is betting on seasonal trends. They're one of those things that really shouldn't work but time and time again, they show a strange inefficiency in markets.
I wrote about five seasonal trends at the start of the month and there were a couple winners but overall it was a tough one for the seasonal trade. But I'll let you decide.
1) Natural gas longs
Natural gas had risen in April for 9 straight years but that trend will come to an end today. Natty is down 2.97% month-to-date despite a nice rebound in the past week. The late turn might be due to an extra-long winter in North America but is more likely due to the astonishing amounts of natural gas that are being produced.
Verdict: That's a loss.
2) Canadian dollar gains
The Canadian dollar is having a big run today in part due to less concerns about GDP because of some soft one-offs in today's report. The BOC also emphasized an H2 rebound that makes their 1.2% 2019 GDP forecast curiously conservative. In any case, the loonie is down 0.3% on the month. Slowing gains in oil and softness in gas hurt CAD.
Verdict: It's down but modestly
3) Dollar index weakness
The dollar index ends the month up 0.17% but it was disappointment on both sides of the trade. It looked to be breaking out but last week's GDP capped the move. That dovetails nicely with the thesis on the short, which was that Q1 seasonal adjustment problems tend to be a dollar drag.
Verdict: I'll call it a push because I highlighted USD weakness versus the euro and EUR/USD is precisely flat on the month (to the pip!).
4) It's a good time to be in stock markets
Buying stocks in April is one of those trades that wins again and again. The S&P 500 is up nearly 4% in the month, the FTSE up 1.9%, German DAX up 7.1% and Nikkei up 5.0%. The one exception was the CSI 300, which is down 1.5% on signals of less Chinese stimulus.
Verdict: See you next year for another round.
5) April easily the best month on the calendar for the pound
It took 29 days but cable longs finally paid off today. The pound is the best G10 performer this month on the heels of today's 110 pip gain. Technically, it looked to be breaking down last week but there were a lot of false signals at the same time. Generally, it's an impressive performance in a month where there was plenty of bad news.
Verdict: The seasonals outweighed the fundamentals this month, or sentiment has bottomed out.
Overall, it was a spotty month for seasonals in what's usually a time of strong signals. I'll have a look at May signals tomorrow.