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January Seasonal Trading
By Lawrence G. McMillan

There are two seasonal trading systems that we utilize in January – one bearish and one bullish. The first one is the bearish one. It is called the “January Defect” by some, and it involves shorting the NASDAQ-100 Index ($NDX; QQQ). It its original form, one shorts $NDX at the close of the 8 th trading day of January and covers the short at the close of trading on the 18th trading day of January. In reality, we have tried to improve on the entry date, as the optimal entry point has varied over the years. We have been tracking this seasonal trade for 29 years. There have been some spectacular profits, with the best being in 2022, when the 8th trading day of the year was very near the all-time high of the market, and when the selling started that day, $NDX fell by 1902 points over the ensuing 10 trading days. Last year, however, there was no place to hide, as QQQ was on a spectacular run upward for the entire month of January. Fortunately, we trade the position with QQQ options, so we can set our risk limits in advance.

The optimal entry point has varied between the 8 th and 12th trading days over the years. Overall, the best performance results...

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