Originally documented by Norm Fosback in his book "Market Logic" back in the late 1970s, the seasonality timing system is a market timing approach that originally probably didn't get the attention it deserved. The basic problem with the approach is that it identifies periods during the month that are seasonally favorable, but only last for a few days. In the 1980's there was really very little opportunity to take advantage of such short periods of higher than average expected gain.

In his newsletter in the 1980s, Fosback suggested a strategy using stock index futures. These were fairly new at the time, tended to be highly leveraged, and required a fairly high initial capital investment to get started. So few investors were able to take advantage of these favorable market days.

Some time after that, options were introduced on the major market indices as well. Since these traded on the stock exchanges, these were more accessible to the average investor, and so seasonality trading become a more viable alternative for the little guy.

These days, not only are options available, but leveraged index funds offered by Profunds and Rydex Funds are structured exactly to take advantage of short term market swings. And even more recently Profunds has started offering Exchange Traded Funds that mirror these leverage index mutual funds, so anyone with a brokerage account, including tax sheltered accounts like IRA's, can trade them. This makes the seasonality timing system available to be a part of almost anyone's portfolio.

The rules for the seasonality timing system are calendar based, using not only days from each month to get into the market, but there are especially favorable days around the exchange holidays that should be traded as well. Since it's calendar based, you don't have to watch for trades every night, because you know months or years in advance when a trade will be taken.

The record of this system is impressive. In fact, almost all the market gain over the last several decades could be had by being in the market during these few days each month, with a considerably reduced downside risk as well.