An Eye on Seasonality That was some finish to the month of October. Its not often that you see the S&P 500 increase 8.4% in a two-week span, yet that is exactly what happened. For good measure, that rally on Friday culminated in the establishment of a new, all-time closing high. Now, the stock market enters what has typically been a good period for stocks in November and December. Actually, November marks the start of the best six months of the year for the stock market, according to the Stock Traders Almanac. The latter point aside, the S&P futures market is signalling a slightly lower start for the cash market when the opening bell rings. An effort to take some money off the table following the huge run would be understandable. Still, while buyers arent in a hurry to buy this morning, sellers arent in a hurry to sell. A fear of missing out on further recovery gains continues to factor into the equation as do copious reports noting the very good performance record for November in midterm years. To that end, the Stock Traders Almanac shows that the average November gain for the S&P 500 in a midterm year has been 2.7%. Average gains for the Nasdaq and Russell 2000 have been even better, up 3.8% and 3.9%, respectively. The Dow has posted an average gain of 2.5%. Tuesday is election day and political pundits have been pointing to the prospect of the GOP taking control of both houses of Congress. Some market participants think that could be the opening for corporate tax reform. Forecasts are just forecasts, of course, so nothing can or should be taken for granted. Our sense of things, though, is that the thought of the corporate tax rate being lowered contributed to the rebound effort in the latter half of October. I touched on that idea and a number of others for why the stock market came roaring back in The Big Picture column this week, What Just Happened?. Whats happening now is a bit of a wait-and-see trade. Will the market pick up where it left off Friday and continue its breakout? What will Dallas Fed President Fisher say today in a 09:30 a.m. ET speech on Preparing to Normalize Monetary Policy? What will the Construction Spending, ISM Index, and Auto Sales reports reveal when they are released today? We already know that final October PMI readings for China, Germany, and the eurozone were revised slightly lower. What will election day produce? What will the ECB and Bank of England announce on Thursday? What will the nonfarm payrolls report produce on Friday? And what will Fed Chair Yellen say on Friday when she speaks about policy since the financial crisis? There are plenty of questions hanging over the market at the start of the week. Answers will be forthcoming, yet the one answer that has prevailed for the better part of the last six years has been to buy on dips. Source: Briefing
Posted on: Mon, 03 Nov 2014 14:18:32 +0000
Trending Topics
Recently Viewed Topics
© 2015