eResearch | For some time, we have cautioned that the market was due for a pull-back. It now seems this retraction is underway. See the S&P 500 Index chart below. We are not anticipating a major correction, but a healthy, needed decline to set ourselves up for a positive close to the end of the year.
Figure 1: Six-Month S&P 500 Index
Changes for October
There are TWENTY-THREE (23) market indexes/sectors that exhibit new seasonal strength in October. See the chart below.
The ONE index/sector that leaves its period of seasonality strength behind this month is: the VIX.
There were TWELVE (12) indexes/sectors that left during the month of September: Russell 2000, Energy, Consumer Discretionary, Consumer Staples, Real Estate (General), Automobiles, Airlines, Biotechs, Retail, Integrated Oil & Gas, Oil&Gas Exploration & Production, and Gold Futures.
Seasonal Trends for the Market Segments in October
The following table shows which indexes/sectors gain or lose seasonal strength during the month of October. There are 23 additions this month, shown in GREEN under FROM, and there is but 1 expiry this month, shown in RED under UNTIL
NOTE: A full seasonality list of indexes and sectors is provided at the end of this report.
Figure 2: Current Seasonal Positive Strength for the Market Segments
Importance of Seasonality Trends
Seasonality refers to particular time-frames when stocks/sectors/indexes are subjected to and influenced by recurring tendencies that produce patterns that are apparent in the investment valuation process. A seasonality study preferably uses at least 10 years of data.
Seasonality Trends Chart
The Seasonality Trends chart below was updated in June 2021. The chart shows the periods of seasonal strength for 38 (formerly 28) market segments (sectors/indexes). Each bar indicates a buy and a sell date based upon the optimal holding period for each market sector/index.
The ten new industry sectors are (1) Retail REITs, (2) Office & Industrial REITs, (3) Residential REITs, (4) Pipelines, (5) Semiconductors, (6) Integrated Oil & Gas, (7) Crude Oil Futures, (8) Automobiles, (9) Airlines, and (10) Railroads.
The Seasonality trends chart is an ever-changing 14-year average of the indexes and sub-indexes that we track. The information in the chart is courtesy of www.equityclock.com.
Figure 3: Seasonality Trends Chart
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