August 2021

A Look Back At July 2021

Below are the 20 stocks that were favored for the month of July and how they performed:

8 of the 20 stocks provided outperformed the S&P 500's return of +2.44% during July. The average return of -1.19% trailed the S&P 500 considerably.

The best performer from our July group was Intuitive Surgical (ISRG), which reported quarterly results, gapped up, then traded back for a day before rising back to new all-time highs. I see ISRG heading higher from here:

It didn't hurt ISRG to be part of health care (XLV), as that sector was the best performing sector in July.

A Look Ahead At August 2021

S&P 500 Performance

Here's a breakdown of the annualized performance of the S&P 500 (since 1950) during the month of August:

August 1-3: +11.38%

August 4-10: -14.79%

August 11-17: +17.35%

August 18-28: -5.52%

August 29-31: +6.13%

I consider August to be one of the most boring, uneventful months. Technology (XLK) likes the month and that sector typically carries August to gains, but you can see from the above that there really aren't any super strong or super weak periods in August. Strength at the beginning of the month tends to be much more short-lived than other calendar months, but the typically bearish period from the 19th to the 25th isn't all that bad in August.

Sector Performance

Before we look at individual stocks, let's get an overview of how the various sectors and industries have performed during August (and September) over the past decade (during this secular bull market):

Sector Heat Map:

The numbers reflect how much a sector, on average, outperforms or underperforms the S&P 500 over the past 10 years. The dark green shaded area shows significant outperformance (1.0 or greater). The light green shaded areas shows solid outperformance (from 0.5 to 1.0). The orange shaded area shows underperformance (-0.5 to -1.0). The red shaded area shows significant underperformance (-1.0 or greater). Where there is no shading, there tends to be more neutral performance (-0.4 to 0.4).

We typically see relative strength in technology (XLK) and consumer discretionary (XLY) during August, while none of the other 9 sectors have outperformed on a relative basis in August. In particular, energy (XLE) and financials (XLF) have historically struggled.

Industry Performance

Let's take a look at the industry heat map within both technology and communication services to drill down to the best seasonal strength:

Technology:

Consumer Discretionary:

Computer hardware ($DJUSCR) and automobiles ($DJUSAU) love August. Here are how both industries look as we move into August:

DJUSCR:

DJUSAU:

The DJUSCR has already broken out and looks quite strong entering August. The DJUSAU, on the other hand, is attempting to break its recent downtrend. A lot will depend on how Tesla (TSLA) trades from here. A breakout on TSLA above 700 would likely signal the start of another strong period for this industry.

It's also worth noting that home improvement retailers ($DJUSHI), recreational services ($DJUSRQ), and software ($DJUSSW) stocks have great track records in August as well. Check out the seasonal relative strength for software over the past decade:

Here are industry groups that tend to perform much better than the benchmark S&P 500 during August:

Communication Services (XLC):

• mobile telecommunications

Industrials (XLI):

• none

Financials (XLF):

• consumer finance, mortgage finance, reinsurance, financial administration

Health care (XLV):

• none

Consumer staples (XLP):

• nondurable household products, distillers & vintners

Real estate (XLRE):

• none

Utilities (XLU):

• none

Energy (XLE):

• none

Materials (XLB):

• gold mining, paper

Stocks for August

We've selected our Top 20 seasonal stocks for August from the S&P 500 and NASDAQ 100. Several names represent sectors and industry groups that have been discussed above. Others simply stand out in August based on their own track record. There's a definite bias this month towards technology stocks, which love the month of August historically. The success or failure of this list in August will be largely dependent on technology performance.

The stocks this month are as follows:

A "Seasonality - August 2021" ChartList will be available for download on our website early on Monday. You must be a StockCharts.com Extra or Pro member to download our ChartLists. Basic members and non-StockCharts.com members can view the charts one at a time. The charts have been annotated with a key support level to watch.

Happy trading!

Tom