Simple Tests of Sy Harding’s Seasonal Timing Strategy

Last Updated: October 9, 2013Posted in Calendar Effects, Technical Trading

Several readers have inquired about the performance of Sy Harding’s Street Smart Report Online, which includes the Seasonal Timing Strategy. This strategy combines “the market’s best average calendar entry [October 16] and exit [April 20] days with a technical indicator, the Moving Average Convergence Divergence (MACD).” According to Street Smart Report Online, applying this strategy to a Dow Jones Industrial Average (DJIA) index fund generated a cumulative return of 213% during 1999 through 2012, compared to 93% for the DJIA itself. As a robustness test, we apply this strategy to the SPDR S&P 500 (SPY) exchange-traded fund since its inception. Using daily dividend-adjusted closing prices for SPY and daily 13-week Treasury bill (T-bill) yields during 1/29/93 (inception of SPY) through 9/30/13, we find that:

Calculations/assumptions used to test the Seasonal Timing Strategy are:

  • Calculate MACD for SPY using the Exponential Moving Average (EMA) template at as the difference between the 26-day EMA price and the 12-day EMA price. A bullish (bearish) crossover occurs when MACD moves above (below) its 9-day EMA.
  • For each calendar year, sell SPY at the close on April 20 if MACD is bearish or otherwise at the close on the first day with a bearish MACD after April 20. If April 20 is not a trading day, shift to the last trading day before April 20.
  • For each calendar year, buy SPY at the close on October 16 if MACD is bullish or otherwise at the close on the first day with a bullish MACD after October 16. If October 16 is not a trading day, shift to the last trading day before October 16.
  • To maximize sample size, assume the strategy is in the market at the beginning of the sample period (1/29/93).
  • When out of the market, assume a return on cash equal to the contemporaneous T-bill yield.
  • For comparison, construct a separate scenario based on seasonal entry/exit only, unmodified by a MACD signal.
  • Use SPY buy-and-hold as a benchmark.
  • Ignore tax implications of trading semiannually.

The following table compares average daily gross returns and standard deviations of daily returns over the entire sample period for:

  1. Buying and holding SPY (SPY)
  2. The Seasonal Timing Strategy with MACD timing adjustments (Seasonal-MACD)
  3. The Seasonal Timing Strategy without MACD timing adjustments (Seasonal Only)

Daily returns for buying and holding SPY are the highest, but also the most volatile. MACD adjustments are slightly harmful compared to a simple seasonal only strategy.

How do the daily returns translate into cumulative results?


The following chart compares the gross (frictionless) cumulative returns over the entire sample period for the same three strategies. Terminal values are $561,156, $479,770 and $508,057 for SPY, Seasonal-MACD and Seasonal Only, respectively. The cumulative return for buying and holding SPY is the highest most of the time, but also the most volatile. MACD adjustments are somewhat disadvantageous compared to a seasonal only strategy. Notable points are:

  • The Seasonal Timing Strategy tends to underperform (outperform) buy-and-hold during bull (bear) markets.
  • Whether or not the Seasonal Timing Strategy beats buy-and-hold based on terminal values is sensitive to the start and stop dates for the return calculations. The Seasonal Timing Strategy would win a competition during the bad decade of the 2000s.

How do the three strategies compare on an annual return basis?


The next chart shows gross annual returns over the entire sample period for buying and holding SPY, Seasonal-MACD and Seasonal Only. Years 1993 and 2012 are partial only. Average gross annual returns (including 1993 and 201) are 10.3% for buying and holding SPY, 8.2% for Seasonal-MACD and 8.6% for Seasonal Only. The respective standard deviations of annual returns are 18.7%, 10.2% and 11.3%. Seasonal-MACD (Seasonal Only) beats buy-and-hold in 7 (9) of 21 years, again indicating that the MACD refinement does not add value.

For clarity, we calculate Seasonal-MACD returns relative to buy-and-hold by year.


The next chart shows the difference in gross annual returns between Seasonal-MACD and buy-and-hold. As noted, 7 of 21 years have positive abnormal returns. On average, Seasonal-MACD underperforms buy-and-hold by 2.1% per year. No trend is evident. Using 1999 as a starting point, as done at Street Smart Report Online, is very advantageous to the Seasonal Timing Strategy.

Are trading frictions material?


The final chart summarizes the effect of trading frictions, ranging from 0.05% to 0.50% per one-way trade, on the terminal values of $100,000 investments per the first chart above. The underperformance of the timing strategies is materially more severe for small investors, who generally bear relatively high frictions, than large investors.


In summary, evidence from simple tests on available data for SPY does not support clear belief that Sy Harding’s Seasonal Timing Strategy is superior to a buy-and-hold strategy, or that the MACD signal refinement improves seasonal entry and exit.

Cautions regarding findings include:

  • Sample size is small in terms of number of bull and bear markets, and test results therefore vary considerably for different start and stop dates.
  • As noted, tests ignore potential impacts of seasonal trading on capital gains taxes.

Independently, Peter Brimelow and Mark Hulbert report in MarketWatch columns of…

10/4/13 that “a hypothetical portfolio that, using Harding’s method, switched between the Wilshire 5000 index, which reflects the performance of the entire U.S. stock market, and 90-day Treasury bills…would have gained 8.5% annualized over the past 12 years, according to the Hulbert Financial Digest, assuming dividends were reinvested. That is better than the 6.9% annualized produced by the original, unmodified version of the Halloween Indicator, which in turn is better than the 6.2% return of simply buying and holding the stock market. Better yet, Harding’s portfolio was completely out of the market half the time, so it incurred only half the risk. That is a winning combination.”

10/5/12 that from the end of May 2002 through September 2012 “the Sy Harding service has significantly improved on the Halloween Indicator, which itself is significantly ahead of a buy-and-hold.”

4/2/12 that “since mid-2002, a buy-and-hold has produced a 5.4% annualized return. A purely mechanical application of the Halloween Indicator (automatically entering the market on Halloween and exiting on May Day) would have produced a 7.0% annualized return. Harding’s modification of the Halloween Indicator produced a 9.0% return (annualized) over the same period, or 2.0 percentage points per year more than a purely mechanical application of this seasonal pattern, and 3.6 percentage points ahead of a buy-and-hold. This is good enough to place Harding’s version of the Halloween Indicator in 4th place for performance since mid 2002, out of the 122 timing strategies the Hulbert Financial Digest has tracked over this period.”

12/26/11 that Sy Harding’s Street Smart Report (6.5%) is one of the best-performing newsletters for 2011 [8th place] among those tracked by Hulbert Financial Digest. However: “Harding, a market timer who uses fundamental and technical methods…has a long record. The problem: It’s terrible. By HFD count, he’s down 6.03% annualized over the last three years vs. a gain of 15.24% for the dividend-reinvested Wilshire.”

12/23/10 that Sy Harding’s Street Smart Report (-13.8%) is one of the worst-performing newsletters for 2010 among those tracked by Hulbert Financial Digest.

12/24/09 that Sy Harding’s Street Smart Report (-12.5%) is one of the worst-performing newsletters for 2009 among those tracked by Hulbert Financial Digest.

11/5/08 that “Over the year to date through October, Street Smart Report is up 3.6% by Hulbert Financial Digest count, vs. negative 32.9% for the dividend-reinvested Dow Jones Wilshire 5000. Over the past 12 months, the letter is up 5.26% vs. negative 36.31% for the total return DJ-Wilshire 5000. Over the past five years, the letter has achieved an annualized gain of 3.18%, vs. 0.78% annualized for the total return DJ-W 5000.”

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