Now in its 45th year, the Stock Trader’s Almanac analyses market data from over a half-century to uncover seasonal trends and behaviors, outlining patterns that can improve a market player’s chances for success. The Almanac has so far unveiled such conventional wisdom as Sell in May, the Santa Claus Rally and more. The book is a permanent fixture at many trading desks around the world.
The capital question for 2011 is whether this year’s horrific news flow will change the trends, obviating any historical seasonal influences. Most probably the answer is “no”, despite a U.S. credit rating downgrade in August and the European crisis that continues to make the headlines. Historically, stocks suffer through September and October, an event the Almanac accurately predicted.
If seasonal patterns remain in place, November marks the beginning of stocks’ strongest three-month period. With last month having been the 4th best October on record, history advocates even stronger gains than the norm. Of the 20 strongest Octobers since 1950, the period from November 1st to January 31st has been positive 17 times, with average gains over 6%.
The trend is very much likely to continue, regardless of the headlines. The pattern is not smooth or unbreakable, as scary and serious news about rising tensions across the globe can trump historical patterns.
Regardless of the ever-present risk of outside shocks, long stocks may be well-positioned for a rally.
The fact of incremental moves in the market is the following: If enough market players believe something to be true, and act upon it, the prediction becomes self-fulfilling.
The Stock Trader’s Almanac is on the desk of market players all over the world, why don’t you buy one and try if it works for your capital?
