Over the weekend, I went shopping for Halloween decorations.
In the store, one of the clerks was wearing a white T-shirt with
a puff-paint rendering of the Dow Jones Industrial Average. The
line representing prices was the color of blood red, dripping
and splashed across the front. When I asked him what it was,
he said “the October Curse.”
‘Tis the season of stock market adages; those age-old Wall Street
platitudes that claim stock prices perform a certain way during
certain months of the year. The problem is, such correlations
are hardly a guarantee.
Take October, for example. Yes, this month has marked some of
the darkest periods in stock market history: 1929, 1987 and on.
Historically, however, it’s not the worst performing month. For
example, the supposed “Halloween Jinx” failed to bring
a deathly pallor to stocks in 2008, as the final days of that
year’s October saw the biggest weekly gain since 1974.
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Then there are these familiar saws of seasonal wisdom:
“As Goes The First Week of January, So Goes The
Month”– In the first week of January 2010, the
stock market enjoyed a powerful winning streak. Yet, by the
end of the month, prices were back in the red, circling the
drain of a two-month low.“Sell In May And Go Away” — And
don’t come back ’till St. Leger’s Day (September). If investors
heeded this wisdom this year, they would have missed one of the
strongest uptrends in stocks of the entire year from July to
September.“September Curse” — If you think
October is supposed to be bad, September is widely assumed to
take the financial killing cake. Yet this year, U.S. stocks enjoyed
their strongest September in 71 years!
Bottom line: Don’t “buy” your trading strategy before
the trend actually arrives. The choice comes down to old adages, or objective
analysis. Pick the latter.
Remove
Dangerous Mainstream Assumptions from Your Investment Process. Elliott
Wave International’s FREE 118-page Independent Investor eBook
shows you exactly what moves markets and what doesn’t. It will
change the way you invest forever. Click
here to learn more and download your free, 118-page ebook.
This article was syndicated by Elliott Wave International and was originally published under the headline October Curse Vs Objective Analysis: The Choice Is Yours.
EWI is the world’s largest market forecasting firm. Its staff
of full-time analysts led by Chartered Market Technician
Robert Prechter provides 24-hour-a-day market analysis to
institutional and private investors around the world.
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