Using history as a guide, the market may be ready for a breakout

Summer's final full month is coming to an end…and it's been a good one, with the S&P 500 up about 3 percent so far in August – reaching new highs. But, the strong performance this month is not the norm. In fact, since 1980, August logs one of the worst average monthly returns for the S&P, dropping about 1 percent.

Keep in mind though, when there are gains in August, it tends to bode well for the market. When the S&P 500 has similar gains of 2.5 percent or more in the month of August, the bullish trend continues with the index adding another 9 percent over the next year – a positive trade 66 percent of the time. The Nasdaq also performs well in that period, gaining 9.6 percent, also trading positively 66 percent of the time. And finally, the Dow tends to fare the best, up about 10.3 percent in the following twelve months and the most consistently positive, higher 78 percent of the time.

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