Best of the Week
Most Popular
1.Stock Market Continues Defying Gravity, Dow New All Time High - Nadeem_Walayat
2.America Superpower 2016 - Ian Bremmer
3.The US Dollar and the Precious Metals Complex - Rambus_Chartology
4.UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - Nadeem_Walayat
5.The “Real Flash Crash” Will Scare You to Death - Shah Gilani
6.Gold Price Trend Forecast - Bob_Louka
7.UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - Nadeem_Walayat
8.Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - GoldCore
9.Will Interest Rates Ever Rise? - BATR
10.Who’s Killing the Stock Market? - Shah Gilani
Last 5 days
Options Pricing - Covert Gamma, Portfolio Insurance, and STDs - 30th May 15
U.S. Crude Oil Production Sets New Modern Record - 30th May 15
Gold Still Waiting - 30th May 15
Investing’s Great Struggle - 29th May 15
How Rich Countries Get Rich - Freedom, Global Poverty, and the Failure of Foreign Aid - 29th May 15
Goldman Sachs Warns “Too Much Debt” Threatens World Economy - 29th May 15
Skunk Works Engineers Supersonic Profits - 29th May 15
Gold, Silver and US Dollar Strength - 29th May 15
This New Currency Could Wipe Out the Euro - 28th May 15
US Housing Market - Something Smells Fishy - 28th May 15
US Economy – Semi b2b Amps Up its Trend - 28th May 15
U.S. Fed Exported QE Travesty: Meet The BLICS Nations - 28th May 15
World War D—Deflation - Secular Bear Markets Analysis - 28th May 15
George Soros Warns of “Third World War” - 28th May 15
Why You Shouldn't Try to Invest Like Warren Buffett - 28th May 15
Stock Markets Buy and Hold is Back! - 28th May 15
We're Now Frighteningly Vulnerable to a Bond Market Crash - 28th May 15
Austerity, Economics and Religion - 28th May 15
National Holidays London and the Magic of Legoland UK Review - 27th May 15
Imminent Stocks Bear Market Signaled by Dow Theory ... - 27th May 15
Gold Price Has Bottomed – More Evidence - 27th May 15
Three Reasons You Shouldn’t Try to Invest Like Warren Buffett - 27th May 15
Gold Is “100% Guarantee from Legal and Political Risks” States Russian Central Bank - 27th May 15
Don't Drown in the Sea of Global Debt - 27th May 15
Three Reasons Why Carl Icahn Is Wrong About Apple Stock - 27th May 15
Crude Oil Price Stochastic Signals - 26th May 15
Why the Stock Market Will Crash - 26th May 15
GDP, Inflation, Employment Economic Statistics: It’s All a Lie - 26th May 15
Introduction to Peak Food - 26th May 15
Should We Dump the Euro? - 26th May 15
A Geopolitical Net Assessment of Europe - 26th May 15
Stock Market Top in Place? - 26th May 15
Best Cash ISA SBI 2.3% - 2.8 Year Fix, UK Interest Rates 2016 - 26th May 15
China Sets Up Gold Bullion Fund For Central Banks - 25th May 15
Is The Silver Trade Getting Crowded? - 25th May 15
Money Murder Mystery: Who Killed the Stock Market? - 25th May 15
Why Do We Celebrate Rising U.S. House Prices? - 24th May 15
Mario Draghi’s Slippery Downward Slope - 24th May 15
Gold : Truth is Stranger than Fiction - 24th May 15
Facebook Stock Price Forecast - 24th May 15
Make a Killing on the Coming Energy "Debt Bubble" - 24th May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

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

© 2005-2015 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

Biggest Debt Bomb in History