Market Historical Month Season
Market Historical averages for each Month, Public Holidays and the Presidential Cycle
3/11: Triple Witching Monday, Dow up 18 of 25
3/15: Triple Witching Day, Dow down 3 of 4
Here are some very useful tools for turning trading losses into gains:
One trading system is to go long at the close on the last day of the month and sell at the close of the first day of the month.
There may be other variations.. like first three days of the month or only during bulish months..
Red FED day usually means red the next day..
April 1st Dow up 15 of last 18.
However, since this is not a sport site, the March madness I am referring to involves the stock market. March has been a difficult month historically for the stock market.
You may remember that in March 2000 the dot.com bubble burst and the market slid into a deep funk. Of course, no one at the time knew that the bubble had burst.
On the contrary, the Nasdaq Composite Index closed above 5,000 on March 10, 2000 and many thought it would continue to go up. It didn’t and lost more than one-half of its value.
Again in March, but this time March 2009, the markets hit bottom after the huge bear market precipitated by the financial crisis, which began in 2008.
For years we have tracked the patterns of this quarterly phenomenon and have found several indicative recurring patterns. While March Triple Witching Weeks as a whole have a solid track record since 1983, advancing 20 times in the past 30 years for an average gain of slightly more than 1%, this strength has not always translated to gains in the following week. Of the twenty advancing expiration weeks, twelve of the following weeks were down.
Usually the weak link in the Best Six months, February tends to follow the current trend, though big January gains often correct or consolidate during the month of Valentines and Presidents as Wall Street evaluates and adjusts market outlooks based on January's performance. Since 1950, January S&P 500 gains of 2% or more corrected or consolidated in February 67.9% of the time.
If the markets follow the 8 year election cycle then sell one year before the final top for this bull run in approximately Nov 2015...
It is not the intent of this paper to forecast the stock market. Even where patterns exist, there is enough variability that it is risky to try to anticipate specific turns in the market. Yet we have identified a potentially profitable four-year stock market cycle that has worked well over the better part of the last century. Investing for the 27 months before a U.S. presidential election certainly seems to be more profitable than investing during the 21 months after the elections.
However, just when you think that you have figured it all out, you find another pattern that can suggest different possibilities. For instance, another analysis shows a highly intriguing re-occurrence in the stock market index. During the entire twentieth century, every mid-decade year that ended in a “5″ (1905, 1915, 1925, etc.) was profitable! This is not to say that all of these years had uninterrupted ascending trends, but by year’s end there had been impressive gains. Whether that pattern was a fluke or will continue in the 21st century is anyone’s guess. And, 2005 is also an inaugural year.
However, trying to figure out such patterns can certainly make life interesting.
The next day after a presidential election is usually down..
The week leading up to thanksgiving is traditionally strong but first trading day after thanksgiving is usually down..
Regarding a Santa Claus Rally, If the 7 days of trading that end on Thursday January 3rd are negative, it does not bode well for the coming year.
Possible Election Outcomes and Probabilities
A relatively comfortable electoral college win by Obama in which the Democrats keep control of the Senate -- 40% probability (baseline expectation): The fiscal drag is about 1%-1.5%, and 2013 real GDP growth is 1%-2%. Republicans briefly oppose Democratic policy but quickly acquiesce to Democrat policy initiatives. Stocks are range-bound and have limited downside (S&P 500 1390-1400) and limited upside (S&P 500 1450-1470) over the balance of the year.
A narrow Obama presidential win and the Democrats retain control of the Senate -- 15% probability: The fiscal drag is 1.5%-2% (Republicans' opposition to Democratic policy continues for a few months, but, ultimately, they acquiesce. Stocks are range-bound and have limited downside (1390-1400) and limited upside (1450-1470) over the balance of the year.
A narrow Obama presidential win and the Republicans regain control of the Senate -- 10% probability: The fiscal drag is 1.5%-2.5% (as partisanship escalates), and 2013 real GDP is barely positive. Stocks have 1350-1400 downside and limited upside (1450-1470) over the balance of the year.
A narrow Romney presidential win and Democrats keep control of the Senate -- 20% probability: The fiscal drag is 2%-3% (as partisanship intensifies), and 2013 real GDP is flat to negative. After an initial but brief market rally, stocks have 1350-1400 downside and limited upside (1450-1470) over the balance of the year.
A narrow Romney presidential win and Republicans regain control of the Senate -- 10% probability: The fiscal drag is 1%-2% -- Democrats' opposition to Republican policy continues for a while but begins to abate as time moves forward -- and 2013 real GDP growth is 1%-1.5%. Stocks have limited downside (1390-1400) and limited upside (1450-1470) over the balance of the year.
A relatively comfortable electoral college win by Romney and Republicans regain control of the Senate -- 5% probability: The fiscal drag is about 1.0%-1.5% -- Democrats' opposition to Republican policy continues for a brief period after which they give in to the Republican agenda -- and 2013 real GDP growth is 1%-2%. Stocks will likely rally in the near term. Over the balance of the year, equities would have limited downside (1390-1400) and upside to about 1470-1500.
Notice how they all end up more or less the same? Range of approx 1390-1470?
Stocks may rally when the bond market is closed and give it all back next day eg. veterans day.
The next day was flat until president Obama's news conference
Fiscal Cliff 2012 and the debt ceiling
Stock Traders Almanac December Low breached warning
When the Dow closes below its December closing low in the first quarter, it is frequently an excellent warning sign. The December Low Indicator was originated by Lucien Hooper, a Forbes columnist and Wall Street analyst back in the 1970s. Hooper dismissed the importance of January and January's first week as reliable indicators. He noted that the trend could be random or even manipulated during a holiday-shortened week. Instead, said Hooper, “Pay much more attention to the December low. If that low is violated during the first quarter of the New Year, watch out!”
17 of the 31 occurrences were followed by gains for the rest of the year after the low for the year was reached. Hooper’s “Watch Out” warning was absolutely correct. All but one of the instances since 1952 experienced further declines, as the Dow fell an additional 11.1% on average when December's low was breached in Q1. Only three significant drops occurred when December’s low was not breached in Q1 (1974, 1981, and 1987).
As January Goes, So Goes the Year
1987 Sotck market Crash 1 year chart
