February: More active in recent years

January 31, 2016 09:00 AM

February was known as a quiet month for many years. Yet, since 2009 when it set the monthly low from the 2008 financial crisis, it has been far more active. Not surprising, in the context of a six-year bull run, that has meant stronger activity and wider ranges compared to its long-term historic tendencies.

From 1928 through 2015, February has had more up months than down months, though the average performance is slightly negative, -0.1%. Its down months were worse (-3.40%) compared to its up months (+2.90%). If the strength during the past six years leads to a near-term reversion to the mean, February 2016 might be more challenging for bulls than the last six years.

The first week of any month is always important because of influences like global Purchasing Managers indexes and the U.S. Employment report. In addition, this month’s Bank of England rate decision (typically on the Thursday of the first full week of any month) is particularly critical. That is because this is one of its Inflation Report and subsequent press conference meetings. And early 2016 is likely to be as critical a rate hike horizon for the BoE as late 2015 was for the Federal Reserve.

The January U.S. Employment Situation Report, released on Feb. 5, also will be more important than usual. It is the first full month indication after the often distorted December holiday season report. It also has extra importance after whatever the Federal Open Market Committee (FOMC) has done (or not) in December or January with no subsequent meeting until mid-March.

Still, on the central bank influence, the Presidents’ Day holiday-shortened week of the Feb. 15 also brings the release of the January FOMC meeting minutes. All of the February influences spill over into March during this leap year. The important end-of-month data on Monday, Feb. 29 leads into all of the key early March data.

About the Author

Alan Rohrbach is Lead Analyst and President of Rohr International, Inc.  He is an international equity index, interest rate and foreign exchange trend advisor. His forte is ‘macro-technical’ analysis of how fundamental influences blend with technical aspects to drive trend psychology. Clients include international banks, hedge funds, other portfolio managers and individual traders.