Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Fiscal Cliff Uncertainty Defeat Stock Market’s Favorable Seasonality?

Stock-Markets / Stock Markets 2012 Dec 07, 2012 - 12:42 PM GMT

By: Sy_Harding

Stock-Markets

It’s no secret that the stock market makes most of its gains in the winter months, and if it’s going to have problems they usually take place in the summer months.

The pattern is so consistent that academic studies prove that over the long-term betting on the pattern even with a strategy as simplistic as the venerable old ‘Sell in May and Go Away’ dictum, outperforms the benchmark S&P 500 by a wide margin, while taking only 50% of market risk.


However, it doesn’t happen every single year. So by far the majority of investors remain skeptics, and in spite of their performance history believe there must be a way to be right 100% of the time.

Last year (2011) the market followed the seasonal pattern in classic fashion. The rally in the winter months of 2010-1011 topped out May 1, followed by a double-digit summer correction. The summer correction ended in October, and a typical winter months rally began.

This year followed a similar pattern – until June. A strong winter rally topped out in late April into a summer correction. But the correction ended at the June low, with a rally that carried the market up to a level fractionally higher than the seasonal May exit. At that point, exiting May 1 had not paid off.

But then the market pulled back again to a level lower than the May 1 peak.

The question for seasonal investors now, fractionally ahead of the market if they followed the spring exit and recent re-entry signal of my Seasonal Timing Strategy, is whether the rally that began in November was the beginning of a typical favorable season rally into next spring. 

It’s been a nervous attempt to rally so far as uncertainties over the fiscal cliff negotiations continue.

That uncertainty is not being helped by the way several months of positive economic reports that indicated the U.S. economic recovery is back on track, have been replaced by some reports for October and November that are less supportive of that conclusion.

As I wrote last week, durable goods orders were flat in October after an encouraging increase in September, new home sales fell 0.3% in October, and consumer spending declined in October for the first time in five months.

On Friday this week it was reported that the University of Michigan-Thomson Reuters Consumer Sentiment Index fell sharply in early December, from 82.7 in November to 74.5 so far this month, much worse than the consensus forecast of 82.0

The Labor Department also reported on Friday that 146,000 new jobs were created in November, much better than the consensus forecast of 95,000. But previous reports for September and October were revised down by 49,000 jobs total.

But don’t count seasonality for the winter months out yet.

The wait and see attitude of business and consumers regarding the fiscal cliff, which has been creating the recent weakness in economic reports, would likely take a decided turn for the better again if a reasonable compromise is reached to avoid the cliff, or at least kick it down the road again.

And nothing in the typically slow negotiation process so far has disabused me of expecting that outcome.

By the way if that happens, although it would a positive for a few months, down the road the remnants could provide the catalyst for the seasonal pattern to continue next summer.

So I continue to be watchfully optimistic that a typical ‘favorable season’ rally will continue to come out of the rubble of the current uncertainties.

But it is still not a time for over-confidence, or to adopt a buy and hold approach.

Until there is more clarity regarding the cliff, I favor conservative holdings like the SPDR DJIA etf, symbol DIA, and the Utilities Sector, via etf’s like the Select SPDR Utilities, symbol XLU, while holding an ample supply of cash ready to pounce on more aggressive opportunities.   

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

© 2012 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

© 2005-2019 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