History is about to repeat. Thackray’s 2010 Investor’s Guide notes that the month of April has a reputation as the strongest month in the year for U.S. equity markets. Strength is notable during the first 18 days of April. U.S. equity markets move higher in anticipation of first quarter earnings reports. The stage is set for additional strength in U.S. equity markets next week.

A word of caution! U.S. equity markets also have a history of reaching an important annual peak near the third week in April in a U.S. mid-term election year.

Seasonality Chart compliments of www.equityclock.com

Just as the warm weather came earlier than usual this year, so should seasonal profit taking come earlier than usual. “Buy when it snows (in October) and sell when it goes (in April)” makes sense this year. Events during a mid-term election year add uncertainty that negatively impacts equity markets from May to October. Will U.S. equity markets take a rest after the favourable period of seasonal strength this year in anticipation of higher interest rates and slowing earnings growth? Responses to first quarter earnings reports will be watched closely for a clue. If traders sell on earnings news, the time to take seasonal profits will have arrived. The charts will tell the tale. The charts currently suggest that equity markets and most sectors are short term and medium term overbought, but continue to climb a “wall of worry”.

Over the next few weeks, a shift to defensive plays is expected that will give investors an opportunity to protect profits through the summer months. Consumer staples will become the investment of choice. Investing during the next two quarters will focus on stock picking. The party is coming to an end and all that is left is the medal ceremony.

Jon and Don Vialoux are authors of free daily reports on equity markets, sectors, commodities, equities and Exchange Traded Fund. Reports are available at www.timingthemarket.ca and www.equityclock.com