The January Effect posits that financial markets experience a seasonal anomaly in the beginning of each year whereby stock prices tend to rise more than in any other month.
But this bullish period extends beyond a single month. In fact, our data show that buyers come out in full force starting in the late fall/early winter.
According to historic seasonal trends, the best time of the year for the stock market is from November to January. Smaller stocks are known to outperform during this period.
And if we’re focusing on small-caps, November is by far the single best month. So it should come as no surprise that the Russell 2000 and S&P Mid-Cap 400 are breaking out to fresh all-time highs this week. They did the same thing last November. In fact, November of 2020 was the best month ever for these small- and mid-cap indexes.
Let’s dive in and discuss some of the seasonal tailwinds supporting these new highs from SMIDs.
They love writing about 'Selling in May and going away'.
Every year, they just can't get enough of it.
But what about, "Remember to buy in November"?
Historically the best 3 month period of the year for stocks is from November through January.
As my pal Jeff Hirsch likes to say, "Buy in October and Get Yourself Sober".
Here are all the seasonal cycles for the S&P500. The Green line includes every year since 1950 (1-year Cycle), the Blue line includes every year ending in 1 since 1951 (Decennial Cycle), and in Gray every post-election year since 1953 (Presidential Cycle):
Every year in the Spring we hear about "Sell in May and Go Away".
And this year that would have worked out well for you. That's when the NYSE Advance-Decline line peaked. That's when the NYSE stocks really began their drawdowns. That's when the new 52-week high list peaked on the NYSE.
On this episode of the podcast, I sit down with Ed Clissold, Chief U.S. Strategist at Ned Davis Research.
I've been a big fan of Ed's work for a long time, not to mention Ned Davis is one of my personal heroes.
The work they do over there has been inspiring to me throughout my entire career. So as you can imagine, it was so fun and such a pleasure to chat with Ed.
We talk about Market Breadth, Sector Trends, Momentum and Seasonality.
If you have any exposure whatsoever in the market, or even thinking about putting on exposure, then this is the episode for you!
Seasonality of markets is something I've done a lot of work on throughout my career. As humans who are part of society, we behave differently depending on the seasons. We dress differently, we hang out with different people, we go to different places, all according to a calendar.
If you think those behavior changes don't impact our decision making, then I don't think you understand humans. And if you think those behaviors and decisions don't affect how we participate in markets, then I think you're just being naïve.
I encourage you to pick up a copy of the annual Stock Traders Almanac published by my pal Jeff Hirsch.
Yesterday after the close, I had a great chat with Ed Clissold, the Chief U.S. Strategist at Ned Davis Research. The podcast episode will be up shortly, so keep an eye out for it. You can subscribe to my Technical Analysis Radio Podcast here, if you haven't already.
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
In last week's report, we played "devil's advocate" and laid out some of the more bearish developments we could find out there.
But all-in-all, the market is still providing bears less room to make a sound argument. We continue to find that any bearish evidence is primarily isolated to shorter timeframes... and even then, still overwhelmed by the abundance of bullish data points.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
As we discussed in our latest report, bears are running out of any substantial fuel to support their position.
And despite the arrival of some long-awaited selling pressure last week, that absolutely remains the case.
From the desk of Steve Strazza @Sstrazza and Louis Sykes @haumicharts
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching in order to profit in the weeks and months ahead.
After several months of consolidation, the major indexes have set the foundation for another leg upward in line with their primary trends. We've been seeing many of them resolve higher in recent weeks.
We continue to see rotation into economically sensitive and cyclical assets - supporting our view that there is a strong appetite, not aversion, for risk.
And the FICC markets continue to confirm this bullish environment for stocks and risk assets.
It's that time of the year again. This is when we hear things like the "January Effect", the "First 5 Days of the Year Indicator", "Santa Claus Rally", "January Barometer" and all sorts of seasonal-type conversations.
Remember, we're right in the heart of "The Best 3 Month Period of the Year". You always hear, "Sell in May and Go Away", but as we pointed out on Nov 6th, it's waaaay more important to "Remember to Buy in November", or "Buy in October and Get Yourself Sober". Either one of those works.
Wall Streeters have all kinds of silly sayings to help remember important things. "The trend is your friend", "Don't fight the Fed", and "Bottom Fishing Can Be Hazardous To Your Wealth" are all good ones that you've probably heard before.
Today I want to talk about the significance of the Santa Claus Rally, and the fact that it might not even come at all. And that in and of itself would be the signal.
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the relative strength trends at play and preview some of the things we’re watching in order to profit in the weeks and months ahead.
Despite being in a split market environment, we've pointed out how the weight of the evidence continues to shift further and further in the direction of the bulls with each passing week.
This past week, we finally saw what appears to be the tipping point as stocks and risk-assets were all up generously. We've been waiting for the market to make up its mind from a risk-appetite perspective, as well as for the stock market to pick a direction after almost three months of sideways action.
