There is a handful of commodity and forex ETFs that have an excellent track record of moving higher in June. The study of seasonality looks at how assets perform at certain times of the year. ETFs allow traders capture these anomalies using a stock exchange product, instead of buying currencies or commodities via a futures contract. Here are some of the strongest commodity and currency ETFs for June.
The iPath Bloomberg Sugar ETN (SGG) has a strong track record in June. It has rallied in June 7 out of the last nine years, or 78% of the time. The average gain in June is 7.3%. That, by far, makes June the strongest month for sugar. Sugar, the commodity, has rallied 16 out of the last 19 years in June (84%).
Since late 2016, the sugar ETN has been in a downtrend, which makes the seasonal buying opportunity less attractive. That said, a downtrend was in effect between 2011 and 2015, and the ETN still often managed to eek out again in June. In 2016, the trend was up, and price rallied 18% in June. This shows that while fighting the trend may work out, the best seasonal trades typically align with the trend, and in 2017 we don't have that.
The CurrencyShares Swiss Franc ETF (FXF) has moved up in June in 10 out of the last 11 years (91%). The ETF has gained, on average, 1.6%. This makes it one of the strongest seasonal opportunities in the currency markets.
Long-term, the ETF is in a downtrend but has been rising throughout 2017. The ETF (and currency) has been moving in one to two-month swings, rallying for a month or two, and then dropping for a month or two. The most recent move to the upside started in mid-May, so based on seasonality and recent price patterns there may be some upside into the $100 resistance area.
CurrencyShares Australian Dollar ETF (FXA) has moved up in June in 9 out of the last 11 years (82%). The ETF has gained, on average, 1.1% in June over that time frame.
The EFT has been ranging since early 2016, between about $78 and $72. The price is currently near the middle of that range, so there isn't a strong technical bias either way. The seasonality indicates a rally in June back above $75, but expect resistance near $76.
The Bottom Line
Use seasonality in conjunction with other fundamental or technical analysis methods. Seasonality tells us what happened before, not necessarily what will happen in the future. Seasonality can help confirm trades that already align with another strategy, or historical averages can be used to help pick profit target or stop loss levels on trades. Using a stop loss is recommended because even though these ETFs tend to perform well in June, in any given year, they could decline, possibly considerably. Sugar tends to move the most. The franc and Australian dollar don't rally as much but have high percentage win-rates in June.
Disclosure: The author doesn't have positions in the ETFs mentioned.