- Seasonal analysis is a hybrid of technical and fundamental analysis, used as a guide to understand how markets tend to move over a set period of time.
- When a market is making a contra-seasonal move, it usually means there is a fundamental change in that market.
- In the energy sector, the seasonal leader during the winter quarter is RBOB gasoline.
Seasonality is an interesting area of market analysis, though widely misunderstood. The basic principle of seasonal analysis is it shows us what a market tends to do over a set period of time, usually 12 months, with its cycles tied to changes in supply and demand. This means seasonal analysis is a combination of both technical (trends) and fundamental (supply and demand) analysis. The misunderstood part is seasonality is a guide rather than an absolute. Therefore, we can use seasonality to tell us what a market tends to do rather than what it will do. Things get more interesting when a market moves counter to its normal seasonal pattern. The usual reason is a change in the market’s fundamentals from normal, a factor that can then influence the flow of investment money.
