Chart Advisor: Is Today the Most Bullish Day of the Year?

By Gordon Scott, CMT

1/ The Turn of Month (and Quarter) Effect

2/ The Russell Reconstitution

3/ Seasonality by Jay

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1/

The Turn of Month (and Quarter) Effect

At least one study articulates the idea of buying the Dow Jones Industrial Average (DJI) on the last day of the month, and selling the third trading day of the following month generates returns that are “significantly higher” than any other four day period in the calendar month. 

It is fascinating to consider why it might be so that, as the paper comments, “this persistent peculiarity in equity returns poses a challenge to both ‘rational’ and ‘behavioral’ models of asset pricing.” But for today, let’s just figure out how to make some money with this idea.

Buying DJI and setting the stop loss 2% lower, and establishing a profit target just 1% higher gives you a natural win probability of 67%. If the turn-of-month effect still holds today (as additional research suggests that it does in other developed markets with studies cited here, here and here), then a 3% edge is a conservative estimate of the impact on the market prices this very day of Monday June 30. 

That’s not a bad start for explaining why this might just be the most predictably bullish day for 2025, but there is more if you care to read on. Hint: strongly suggest you read on.

2/

The Russell Reconstitution

The Russell Index reconstitution occurs annually on the last day of June. There is considerable debate about whether the reconstitution effect has dissipated for other indexes, but at least some investors seem to believe that it is still prevalent enough to chase. No matter what happens, the reconstitution of all three major indexes will spur a lot of algorithmic buying and selling, likely increasing trading volumes higher than a usual summer Monday and Tuesday.

That kind of activity doesn’t always guarantee an upward drift, but it certainly doesn’t hurt, especially when the markets are already in a bullish mood. When you consider the headlines (take your pick of them) that have appeared over the last two months, it is amazing to think the market has fully rebounded from its panic attack earlier in the year.  If that isn’t evidence of a bullish mood, what is? Here is what it looked like for the Russell 2000 Index (RUT) after reconstitution in 2023 and 2024.

While the major indexes can certainly diverge from one another, it isn’t usual that they will diverge that far. If RUT has a repeat performance from the past two years, the major indexes will likely look similar.

3/

Seasonality by Jay

In a recent LinkedIn post, expert analyst and seasonality buff Jay Kaeppel (rhymes with maple) wrote these words: “There are never ANY guarantees when it comes to seasonality. That said, historically speaking, now is not a bad time for traders to look for opportunities in stock indexes. @sentimentrader”

I couldn’t get his permission to use the graph, but I asked one of those AI large language model tools that are freely available on the internet to generate a similar image inspired by his chart. Jay’s chart was a typical one-year seasonality chart for the S&P 500 (SPX) and showed a dip at the end of June and a strong surge through July.

The LLM came up with something like this:

Usually I’d take this moment to remind readers what the first letter in “AI” actually stands for, but hey, though even I could draw a better chart, this graphic is still on point. It is an unusually bullish moment right now in the markets. It might not feel like it, but that’s kind of the point of the old saying that goes “a bull market climbs a wall of worry.” Get ready to watch it climb the next leg upward.

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Originally posted 30th June 2025