eResearch | For some time, we have cautioned that the market was due for a pull-back. Last month, we thought it was finally happening. The charts below show otherwise. Chart 1 is the S&P 500 Index until the end of September. Chart 2 is until the end of October.
Figure 1: Six-Month S&P 500 Index To September 30
Figure 2: Six-Month S&P 500 Index To October 29
Comment: With a meaningful rebound that occurred just before the middle of the month of October, it looks like the Strong Seasonality Period got off to an early start. The S&P 500 Index has catapulted to, yet again, new all-time highs. The other major indexes show a similar trend. The market continually seems to be shrugging off any negative news. That worries us. Still, “the trend is your friend”, so we have to hang in there, although some profit-taking is never a bad decision. But we also have to be ready to jump. A catalyst … the catalyst … never announces itself in advance. You don’t realize it has happened until some time later. So, be alert1
Changes for November
There are TEN market indexes/sectors that exhibit new seasonal strength in November. These include: Russell 2000; Energy; Utilities; Real Estate (General); Automobiles; Pipelines; Gas Distribution; Retail; Integrated Oil & Gas; and Oil & Gas Exploration & Production. See the chart below.
The TWO indexes/sectors that leave their period of seasonality strength behind this month are: the U.S. Dollar Index and the Airlines.
There was just ONE index/sector that left during the month of October: the VIX..
Seasonal Trends for the Market Segments in November
The following table shows which indexes/sectors gain or lose seasonal strength during the month of November. There are 10 additions this month, shown in GREEN under FROM, and there are 2 expiries 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 3: 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 4: Seasonality Trends Chart
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