The Stock Market

     

 

 

Old Truism

Readers are surely aware of the saying “sell in May and go away”. It is one of the best-known and oldest stock market truisms.

And the saying is justified. In my article “Sell in May and Go Away – in 9 out of 11 Countries it Makes Sense to Do So” in the May 01 2017 issue of Seasonal Insights I examined the so-called Halloween effect in great detail. The result: in just two out of eleven international stock markets does it make sense to invest during the summer months.

 

October meetings after you forgot to sell in May [PT]

 

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Some Things Actually Go Up Before and During the Fall…

In recent issues of Seasonal Insights I have discussed two asset classes that tend to suffer  performance problems in most years until the autumn, namely stocks and bitcoin.

I thought you might for a change want to hear of an asset that will be in a seasonal uptrend over coming months.

 

Many things, including bitcoin, stocks and leaves tend to fall in the aptly named fall… but some things actually start to fly…

 

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[Ed. note: we are republishing the original Frank Roellinger article on the Modified Ned Davis Method with an up-to-date performance chart]

Introduction and Disclaimer

An earlier version of this article was submitted to Seeking Alpha but was rejected because it contained no “in-depth, fundamental analysis”. A brief search of the SA website disclosed references to fundamentally based articles on the Acting Man website. So I sent Pater a note claiming knowledge of a fairly accurate, purely mechanical method to identify significant long-term turning points in the market. I offered to tell him a few days in advance the target point of the next signal. He graciously offered to publish my article here. If it can be arranged, I will post its buy and sell signals as they occur in the future. This information is for educational and entertainment purposes only, it will never be a recommendation to buy or sell anything. But I believe that it will prove interesting to consider and watch over time.

 

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Down the Rabbit Hole

“The hurrier I go, the behinder I get,” is oft attributed to the White Rabbit from Lewis Carroll’s, Alice in Wonderland.  Where this axiom appears within the text of the story is a mystery.  But we suspect the White Rabbit must utter it about the time Alice follows him down the rabbit hole.

 

Pick a rabbit to follow…

 

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Don’t Be Fooled by These Calm Markets

What is happening in the world of money? Well – the most striking thing is: nothing.

It doesn’t seem to matter what happens. Dysfunction in Washington. Meltdown of the techs. No matter how rough the seas get, the markets glide along… scarcely noticing the storm-tossed waves below.

 

Thankfully the world’s central planners are so well-versed in egging on the creation of an ever greater mountain of debt and seemingly limitless asset price inflation with their “scientific” monetary policy that a complete blow-up of the the financial system only threatens now and then… most of the time we are in “moderation” mode. Nowadays we are in something that feels like a Valium-induced waking dream. It couldn’t be better… volatility has just served up its greatest disappearance act since the end of the last “moderation”.  What could possibly go wrong? – click to enlarge.

 

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Seasonax Event Studies

As our readers are aware by now, investment and trading decisions can be optimized with the help of statistics. After all, market anomalies that have occurred regularly in the past often tend to occur in the future as well. One of the most interesting and effective opportunities to increase profits while minimizing risks at the same time is offered by the event studies section of the Seasonax app.

 

A recent event that had quite an impact on certain markets… [PT]

 

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Selling in May, With Precision

If you “sell in May and go away”, you are definitely on the right side of the trend from a statistical perspective: While gains were achieved in the summer months in three of the eleven largest stock markets in the world, they amounted to less than one percent on average. In six countries stocks even exhibited losses! Only in two countries would an investment represent an interesting proposition, as I have shown in the last issue of Seasonal Insights via back-test calculations for the time period 1970 to today.

 

The perennial stock market question: when is the right time? [PT]

 

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Chugging along in Nosebleed Territory

Last Friday, both the S&P 500 and the Nasdaq composite indexes closed at record highs in the US, with the Dow Jones Industrial Average only a whisker away from its peak set in March. What has often been called the “most hated bull market in history” thus far continues  to chug along in defiance of its detractors.

 

Can current stock market valuations tell us something about the future trend in gold prices? Yes, they actually can.

Image source:  The Neatest Little Guide to Stock Investing

 

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An Old Seasonal Truism

Most people are probably aware of the saying “sell in May and go away”. This popular seasonal Wall Street truism implies that the market’s performance is far worse in the six summer months than in the six winter months.

Numerous studies have been undertaken particularly with respect to US stock markets, which confirm the  relative weakness of the stock market in the summer months.

 

May has a bad reputation… rightly so, as it turns out.

 

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Approaching a Tipping Point

Taking the path of least resistance doesn’t always lead to places worth going.  In fact, it often leads to places that are better to avoid.  Repeatedly skipping work to sleep in and living off credit cards will eventually lead to the poorhouse.

 

Sometimes the path of least resistance turns out to be problematic

 

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Counterintuitive Moves

Something odd happened late in the day in Wednesday’s trading session, which prompted a number of people to mail in comments or ask a question or two. Since we have discussed this issue previously, we decided this was a good opportunity to briefly elaborate on the topic again in these pages.

A strong ADP jobs report for March was released on Wednesday, and the gold price dutifully declined ahead of it already, while the stock market surged concurrently. Later in the day, the Fed minutes were published, and their tone was definitely seen as very “hawkish”, at least by today’s standards.

 

Strange happenings alert!

 

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Is Seasonality in Individual Stocks Based on Sound Evidence?

People often wonder whether it is actually possible to make profitable trades by taking advantage of seasonal trends in individual stocks. Most investors accept the idea that seasonal trends in commodities exist and are also quite open-minded with respect to recurring phenomena such as the year-end rally in stock indexes.

 

S&P 500 Index, 30-year seasonal chart – the year-end rally is highlighted. It has been observed in 24 of the past 30 years and its average gain far exceeded the average loss of the six losing years. Moreover, its average gain represents more than a quarter of the average annual return of the index. The existence of this pattern is widely acknowledged and there are reasonable explanations for it.  Source: Seasonax

 

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