Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Bullish Silver Stealth Buying - 24th Oct 14
Blood in the Streets to Create the Gold Stocks Investor Opportunity of the Decade - 24th Oct 14
Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern - 24th Oct 14
War And The Law Of Unintended Consequences - 24th Oct 14
Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - 24th Oct 14
Saudi Move to Cut Oil Prices Is Now Russia's Biggest Economic Threat - 24th Oct 14
US Stock Market Top Is Now In Sight - 24th Oct 14
New Profit Points in the Shifting Balance of Power, Welcome to Saudi America - 24th Oct 14
QE Failure & Folly Of Paper Mache, Treasury Bond Integrated Lifeline Patches - 24th Oct 14
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Stock Market’s History of Seasonality Continues!

Stock-Markets / Stock Markets 2013 Jan 26, 2013 - 11:50 AM GMT

By: Sy_Harding

Stock-Markets

Once again the stock market’s favorable season is producing an impressive rally. The Dow has gained more than 10% since its November low, with the rally accelerating in the new year, a 7% gain in just the last 4 weeks.
There are certainly reasons for optimism and the market rally.

As it has for the last three years, the economic recovery has resumed impressively after its summer stumble. Most U.S. economic reports, in housing, employment, retail sales, manufacturing, are beating even optimistic forecasts. The euro-zone debt crisis has moved out of the headlines, ECB president Draghi’s promise of “whatever it takes” having successfully kicked the crisis down the road. In Asia, fears that China’s economy was slowing into a hard landing have been alleviated by several months of much better than expected economic reports.


The political uncertainty of the U.S. Presidential election, and the unusually divisive election campaign, is now history. The more recent concerns, that an agreement to extend the Bush-era tax cuts would not be reached by year-end, and that the debt ceiling would not be raised in time to prevent the government from shutting down by mid-February, have been kicked down the road by several months.

What is it about winter months?

It never ceases to amaze me how background conditions work out to continue the long history of the market making most of its gains each year in the winter months (and when there is a correction of any degree it almost always takes place in the unfavorable season between May and November).

It’s not just a phenomenon of the U.S. market. Academic studies show similar seasonality in the markets of 36 of 37 developed countries.

The favorable season traditionally lasts until May, and Congress has pushed the debt ceiling deadline out to mid-May to give both sides more time to hammer out a budget agreement.

So there are reasons to expect the favorable season rally to continue, and I and my subscribers remain 100% invested in our Seasonal Timing Strategy portfolio, and 80% invested in our non-seasonal Market-Timing Strategy, enjoying the ride and expecting more gains ahead.

There is certainly a tremendous amount of cash on the sidelines earning next to nothing in savings accounts and bond funds to fuel a further rally. And there is evidence that previously bearish and pessimistic investors who took money out of the stock market in 2009, 2010, 2011, and right up until mid-year last year, long after the new bull market began in early 2009, are now pouring money back in.

Fund-tracker Lipper Inc. reports that over the last two weeks U.S. stock mutual funds experienced the highest two-week inflow of new money since April, 2000. And the Investment Company Institute reports that deposits into mutual funds last week were the highest since early 2007.

But most investors are terrible market-timers, especially those who think of themselves as buy and hold investors, and for now I’m going to ignore the fact that April, 2000 was just about the peak of the 1991-2000 bull market, and early 2007 was only months before the 2003-2007 bull market ended. I’ll ignore it because this time the inflow has just begun, while in 2000 and 2007, although beginning late in those bull markets the inflow had lasted for a couple of years.

The change in sentiment is also showing up in this week’s poll of its members by the American Association of Individual Investors, which showed sentiment jumped to 52.3% bullish, and bearishness dropped to only 24.3%.

However, investors should not become too exuberant, too willing to buy and hold, too confident that all is well again for the long-term.

The uncompromising antagonism in Washington that upsets markets will soon rise again, as budget and debt ceiling talks resume leading up to the next deadline, now pushed out to April or May.

And by summer it’s liable to be a gloomy ‘big-picture’ scenario again, brought on by the slowing effect on the economy of government spending cuts to bring budget deficits under control, or the Fed beginning to remove the stimulus punch bowl, a return of the eurozone crisis, or of inflation finally beginning to show up.

So enjoy the rally, but study up on how markets really work. Think cycles not endless trends. And keep in mind that even in sustained rallies the market doesn’t move in a straight line. The market has been up 11 of the last 12 days. That has investor optimism rising and money flowing in to an unusual degree. But it also has the market short-term overbought and so vulnerable to at least a short-term pullback.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2013 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.

Sy Harding Archive

© 2005-2014 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

Free Report - Financial Markets 2014