Energy seasonality, fact or Folklore?

I do not follow seasonality because from past experience I find in a bull market seasonality will have you buy - sell higher - and buy back even higher. In a bear market seasonality will have you sell - buy lower - and sell even lower.

I clipped this from DVTechtalk January 18, 2010 - Thoughts on the Seasonality in the Energy Sector. According to Thackray’s 2010 Investor’s Guide, seasonal influence on the U.S. Energy sector is from February 25th to May 9th. Brooke also has completed other studies in the sector and has found that seasonality in the Canadian energy sector, U.S. Oil Services sector and the U.S. Oil Exploration and Production sub-sector are slightly different. Their period of seasonal strength is from January 30th to May 9th. In addition, returns offered by the Canadian energy sector, U.S. Oil Services sector and the U.S. Oil and Exploration and Production sub-sector are significantly higher than the U.S

I know from experience few investors will stick to any model when over time, it stops working and the problem here is the seasonal Energy calls simply never worked over the last 10-years. A simple buy-and hold from January 2000 to date returned 315%and the seasonal trades generated 179% over the same period. Note during the 2000-2006 advance the tendency to sell high and buy back higher. The only big call was the sell in April 2008 but once again one could also argue that in April - May 2008 you could have sold anything and been correct. Also as of now the seasonal model has missed the May 2009 to January 2010 recovery having sold last April.

At the moment the fact-or-folklore question needs more study – so over the next few weeks let us audit a few more seasonal trades before May when we all go away.