With almost 70% of NYSE stocks trading below their 30-week moving averages, there’s plenty to choose from for investors looking to “Play The Bounce” in YTD underperformers. The traditional “Bounce” season extends from October through January; with the MTI having just turned negative, though, we’d advise against putting this strategy to work immediately. Here are a couple of additional observations gleaned from more than 25 years of tracking this strategy:
The historical batting average of this strategy has been decent, with gains in 9 of 18 years along with “excess” returns over the S&P 500 in 10 of 18 years. The best Bounce seasons have occurred when the market was either down for the year through September, or up only modestly.