Hot Julys Often Lead to Market Slides for the Dow

In the original research conducted by our illustrious founder and creator of the Stock Trader’s Almanac, the late Yale Hirsch, he defined a “Hot July” market as a gain of 3% or more for the Dow. This week’s carnage notwithstanding, sizable gains on the last trading day of July buoyed DJIA to a 4.4% gain for July 2024.

Every DJIA “Hot July” since 1950 was followed by a retreat that averaged 7.0% from July’s close to a subsequent low in the second half of the year. The worst decline was 32.4% in 1987 while the mildest DJIA decline was 0.1% in 1958. Historically, “Hot Julys” have led to better Autumn buys as many of the subsequent lows occurred in September and October.

NASDAQ closing down 0.75% for the month and S&P 500 lagging DJIA up just 1.1% underscores our near-term outlook for increased volatility from August to October ahead of this unprecedented presidential election campaign season on the backdrop of a market itching for a Fed rate cut and erratic economic, employment and inflation readings. The week’s action is a case-in-point.

As noted in our August Almanac and Outlook over the past two weeks and on our July 31 member’s webinar, notoriously week August is historically much better in election years. However, with the market running hot all year, arguably overbought and way ahead of itself, our cautious stance during the “Worst Four Months” of the year July-October seems the most prudent course of action. Our “Best Months” MACD Seasonal Sell signals on April 2 for DJIA and S&P and June 25 for NASAQ appear to be rather timely at this point.