Best of the Week
Most Popular
1.Gold And Silver Voodoo Analysis Price Forecasts - Austin_Galt
2.UK Saved From I.S. Threat But Scottish Independence Nightmare is Not Over! - Nadeem_Walayat
3.Silver Price At or Very Close to an Important Low - Clive_Maund
4.Gold And Silver - PetroDollar On Its Deathbed? PMs About To Rally? No - Michael_Noonan
5.Gold and Silver Bear Phase III Dead Ahead - Rambus_Chartology
6.Stock Market Major Selloff Looms - Zeal_LLC
7.Inflate or Die! When Leverage Fails and Market Hope Turns to Fear - Ty_Andros
8.Gold Price Very Close to an Important Low - Clive_Maund
9.Market Forecasts for Stocks, Gold, Silver, Commodities, Financials and Currencies - EWI
10.U.S. Aggression - Will Russia and China Hold Their Fire? - Paul_Craig_Roberts
Last 5 days
“Back Door” Method For The Government To Pay Down The Federal Debt Using Private Savings? - 1st Oct 14
Dow Stocks Index And The No Mercy Cycle - 1st Oct 14
Why China Thinks Gold is the Buy of the Century - 1st Oct 14
Forex Volatility Predicts Bottom in Gold and Silver? - 1st Oct 14
Stock Market Wil-e-Coyote Moment May Have Arrived - 1st Oct 14
Europe Teetering the Ddge of a "Japan-style" Deflation - 30th Sept 14
Economists Economic Atonement - 30th Sept 14
Everything You Need to Know About the Stock Market S&P Index Until Christmas - 30th Sept 14
Singapore Becoming Global Gold Hub - Launches Kilo Bar Contract And Gold ATMs - 30th Sept 14
Germany Fights on Two Fronts to Preserve the Eurozone - 30th Sept 14
Turn the Tables on the Gold and Silver Market Manipulators - 30th Sept 14
U.S. 2014 Election Business as Usual - 30th Sept 14
Gold - Time to Buy the Dip? - 30th Sept 14
Urging Investors to Stay Liquid for the Coming Gold Stocks Boom - 30th Sept 14
The Japanese Deflation Myth and the Yen’s Slump - 29th Sept 14
Epic Investor Optimism that Can Be Reversed Only by a Huge Stocks Bear Market - 29th Sept 14
Russia’s Gokhran Buying Gold Bullion In 2014 and Will Buy Palladium In 2015 - 29th Sept 14
The End of Monetary Policy - 29th Sept 14
Here's What Rising Interest Rates Really Do to Your Shares - 29th Sept 14
Is a Credible Stock Market Top Forming? - 29th Sept 14
Silver Price At or Very Close to an Important Low - 29th Sept 14
Gold Price Very Close to an Important Low - 29th Sept 14
Nihilism And The Unknown Future - 29th Sept 14
Stock Market S&P, NAS Change In Trend? None Apparent, But A Caveat - 29th Sept 14
UK Saved From I.S. Threat But Scottish Independence Nightmare is Not Over! - 29th Sept 14
U.S. Aggression - Will Russia and China Hold Their Fire? - 28th Sept 14
Currency Wars and the Death of the Euro - Audio - 28th Sept 14
Obscure Maritime Law Practically “Guarantees” Profits for These Energy Companies - 28th Sept 14
Stock Market Primary IV Underway? - 27th Sept 14
Darwin And The Climate Apocalypse - 27th Sept 14
The Global Middle Class and Copper Consumption, A Stop Spike Event - 27th Sept 14
Can Money Save The Climate? - 27th Sept 14
Gold And Silver - PetroDollar On Its Deathbed? PMs About To Rally? No - 27th Sept 14
Debt and Inflation Consquences of American Fear - 27th Sept 14
U.S. and Global Confidence are in Divergence - So Are Stock Markets - 27th Sept 14
Are U.S. Cars About to Crash? - 27th Sept 14
Why the U.S. Created and Armed ISIS From Libya to Syria - 27th Sept 14
Stock Market vs the Developing Bear Market for Liberal Democracy? - 26th Sept 14
Stock Market Major Selloff Looms - 26th Sept 14
How My Charts Uncovered Two Big Stocks That Are Soaring Like Small Caps - 26th Sept 14
What Cycles Reveal About Stock Market Crash - 26th Sept 14
Gold Not A Safe Haven On Terrorism, Middle East Bombing, Russia ... Yet - 26th Sept 14
Valuing Gold and Turkey Farming - 26th Sept 14
Gold $1200 Underpinned by Physical Demand - 26th Sept 14
Inflate or Die! When Leverage Fails and Market Hope Turns to Fear - 26th Sept 14
Market Forecasts for Stocks, Gold, Silver, Commodities, Financials and Currencies - 26th Sept 14
Gold and Silver Bear Phase III Dead Ahead - 26th Sept 14
The Home Depot Breach Boils Our Blood – and It Should - 26th Sept 14
Why the Pundits are Wrong About Crude Oil Prices - 26th Sept 14
Where’s the Economic Growth? - 26th Sept 14
Stock Market Future Bull - 25th Sept 14
The Specter of Global Debt Default is Once Again Rearing its Head - 25th Sept 14
All Major Market Analysis and Forecasts Investor Open House has Started! - 25th Sept 14
Federal Reserve Policies Cause Booms and Busts - 25th Sept 14
Currency Wars Deepen - Russia, Kazakhstan Buy Very Large 30 Tons Of Gold In August - 25th Sept 14
Strong U.S. Dollar Pressures Gold - 25th Sept 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Most Exciting Event in the History of Technical Analysis

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