Stock Seasonal Favors Trend Reversal
October 12, 2011 
1 Comment
October 11, 2011 11:49 PM GMT
Reprinted with permission from IBTimes.com. Original article: http://www.ibtimes.com/articles/229320/20111011/stock-futures-trend-jay-norris-ibtrade-stock-market.htm
While the primary trend – months to years –for the S&P 500 is still decidedly higher, the secondary trend -weeks to months – is lower. That secondary trend however could change in a hurry if the 25-year seasonal for this index holds up – see chart below.
The 25-year horizon for stocks is a reliable one according to IBTRADE strategist Jay Norris, “because it was in the mid-80′s when 401K’s with firm matched contributions kicked in, which changed the dynamic of investing and speculating because it insured a more regular cash flow on the buy-side”.
Live Market Trading Exercise with Jay Norris. 1-month free. Start now
It was in fact the mid-eighties when stock market corrections, or secondary moves tended to be more short-lived, albeit more violent — which is another story. Should the 25-year old bullish seasonal coming out of October hold up it could spell another leg higher into the New Year. According to Mr. Norris, “When you talk to experienced investors there is certainly no shortage of cash waiting to go into the market… It’s just they’d rather see one more dip to buy into, rather than have to buy an upside break-out. What investors want and what actually occurs though, are often two different things”.
Judging from the amount of bad press about the global economy for two of its biggest drivers, the U.S. and Europe, a bet on a stock market recovery would appear to be a contrarian play.
Jay Norris hosts Live Market Exercise where he spends 12 hours per week pointing out trade set-ups and signals in live markets. He is the author of Mastering Trade Selection & Management, McGraw-Hill, 2011, and Mastering the Currency Market, McGraw-Hill, 2009.
Trading futures or Forex is a risky endeavor and not suitable for all investors!
Trackbacks/Pingbacks
[...] poll about the best forex position sizing method. How do you determine the position size?Jay Norris discuss seasonal trends in stocks that impact currencies as well.Apart from the quarterly report, [...]