Seasonalities and market phases

Quantitative and foundational trading

Without underlying principles, quantitative and mathematical assessments don’t surface the needed signals. While it’s possible to simply trade on a Moving Average indicator basis, there are times when this works (Bull market), but there are times when it doesn’t (Bear market, economic irritations, political disruptions, you name it).

Most quantitative systems suffer from severe drawdowns because they are built based on a mathematical “alpha” and backtest metrics. Looking for those assets and strategies, without returns that correlate to the market. In theory, that is very nice, but practically the first quantitative hedge funds thrived because these approaches used to be exclusive (volatility targeting, trend following, momentum strategies, Machine Learning etc.)

Seasonalities

The core idea about seasonalities is, that there are commodities which are needed during different times of the year. Futures are mostly logistics, and therefore subject to seasonal price impacts

• heating oil isn’t needed in summer

• wheat is subject to farming seasons

  • lean hogs need food