Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Stock Market Seasonality Revisited!

Stock-Markets / Seasonal Trends Oct 01, 2010 - 05:11 PM GMT

By: Sy_Harding

Stock-Markets

Since we are within a few weeks of the potential beginning of the market’s historically favorable season, it’s time to again bring up the subject of the market’s seasonality.


The volatility has made it an interesting year to say the least. The market topped out in late April, as called for by seasonality (Sell in May and Go Away). It then declined 17% to a low in late June, rallied back some in July, then experienced its worst August in nine years.

But it has now rallied off that low for four straight weeks, in the process producing the best September in years.

As a result, the S&P 500 is now only 6.2% below its April top.

Will seasonality work out this year? That would require the market to remain below its April top until seasonality’s re-entry signal, and preferably be considerably lower.

Seasonality doesn’t work out every year. But it works out so consistently that over the long-term it outperforms the market to a significant degree, while also avoiding large losses (since they most often occur in the unfavorable seasons), and while taking only 50% of market risk (since one is in the market roughly only six months out of every twelve).

There’s plenty of time for the market to go either way, to a level higher than at the exit in the spring, or to a significantly lower level.

Based on the decades-old ‘Sell in May and Go Away’ strategy, the time to re-enter is November 1. My own seasonal strategy, STS, which as the Stock Trader’s Almanac says, “almost triple’s the performance” of the basic Sell in May strategy, uses a momentum reversal indicator to better pinpoint the entries and exits. Its entry signal can come as early as October 16, or as late as early December.

So again, plenty of time for the market to go either way.

If the month to month reversals continue - the market down in May and June, up in July, down in August, up in September - October would be a down month.

October also has quite a history of being a mean month for the market. Both of the market’s historical crashes, in 1929 and 1987, took place in October, as did the mini-crashes of 1989 and 1997. The worst week in market history was the second week of October in 2008, in which the Dow plunged 18.2%.

There are other reasons to expect seasonality will work out to produce a lower market rather than higher by the time seasonal re-entry signals are triggered.

One of the more interesting is investor sentiment, which has been made very bullish and complacent by the September rally.

For instance, the poll of its members by the American Association of Individual Investors reached a level of 50.9% bullish a couple of weeks ago, a level that is usually a warning sign. It has dropped back since, but that doesn’t change the warning. The poll usually only reaches a warning level for a week or two before beginning to reverse. It reached a level of 48.5% bullish for just one reading, on April 15, two weeks prior to the market top on April 26.

We are also entering the third quarter earnings reporting period, with a potential dark cloud overhead regarding it. More than twice as many S&P 500 companies have warned their earnings will not meet Wall Street’s estimates than pre-warned prior to the second quarter earnings reporting period.

Then there is the continuing predominance of negative economic reports, indicating the market probably got ahead of itself with its September rally, in anticipating that all is well with the economy again.

So, in my opinion anyway, we enter October with the odds still high that seasonality will prevail, that the unfavorable season is probably not over until the seasonality rules say it’s over.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website www.StreetSmartReport.com, and the free daily market blog, www.SyHardingblog.com.

© 2010 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules