BUY HALLOWEEN? SEASONALITY OF EQUITY MARKETS

The next several months carry better odds for positive equity returns. As Doug Short noted in his ultimate analysis of market seasonality:

November and December tend to end the year on a high note. Together with January, March and April, they’ve combined to inspire the "Sell in May, buy Halloween" strategy. February is the naughty winter month.

This is the simplified chart from RBC Capital Markets

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Here is Doug Short’s:

However, be aware that the market is overbought by 2 standard deviations relative to trend:

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But what does it really mean?

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Note that stocks were  higher in 6 of 9 prior
episodes after reaching a similar technical
extreme.

See my Oct. 29 post: TIMBER?

 

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