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Will Stocks Get Stung By the "October Curse"? C'mon, Seriously
More and more, Wall Street does with its old adages what department stores do with holiday decorations: they put them out months ahead of time so that shoppers already think "Easter bunny" at Thanksgiving.
Case in point: The fall season is barely upon us and already, the financial mainstream is gearing up for the widely anticipated "October Curse" to strike down the bullish trend in stocks.
The problem is, you can't "pre-sell" an autumn meltdown as if it were some tradition that always comes along once a year without fail. Yes, October has marked some of the blackest periods in stock market history: 1929, 1987, an on. Historically, however, it's not the worst performing month.
Here, it may help to go back and see how the other, similar saws of wisdom have panned out over the last year:
- "Halloween Jinx": According to the usual pundits, the black mood surrounding the October 31 holiday scares the bull-jeezus out of stocks. YET -- thanks to a string of 700-, 800-, and 900-point rallies, the final days of October 2008 saw the biggest weekly gain since 1974.
- "Santa Claus Rally": So goes the saying, the jolly spirit of ole Saint Nick carries over into stocks. YET -- 2008 marks Wall Street's worst annual performance in over SEVEN decades. Respectively, the Dow lost 34%, the S&P 500 lost 38%, and the Nasdaq Composite suffered its worst year ever.
- "As Goes the First Week of January, So Goes the Month": In the first week of January 2009, the stock market enjoyed a powerful winning streak of over 20% gains, prompting these exuberant headlines: Get Ready For a "New Bull Market," "New Cheer On Wall Street," and "Stocks Start Year With Bang."
YET -- by the time January came to its conclusion, the S&P 500 closed its worst opening month since its creation in 1952. The long-awaited "President's Rally" was also a no-show.
- "Sell in May And Go Away" -- And don't come back till St. Leger's Day (September). If investors heeded this wisdom, they would have missed one of the strongest uptrends in stocks of the entire year from May to late August 2009.
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: EWI's premier publications, The Elliott Wave Financial Forecast and its near-term sister service, Short Term Update.
Here, the following archive reveals the true benefit of our expertise:
One week before the U.S. stock market landed at its 12-year low of March 9, our February 27, 2009 Short Term Update utilized a specific turning pattern to outline a time window for the onset of a major upside reversal. In STU's own words:
"By all indication, this pattern is back on track... the turn will come on or near March 10, 2098. Anywhere in this time period may mark a turn, which will obviously be a market low."
Following on its heels, the April 2009 Elliott Wave Financial Forecast sharpened its analysis to reveal a few more defined details about the coming changes: Such as,
- "The rally will carry the Dow to 9,000-10,000." -- and
- "The American Association of Investors Intelligence (AAII) Survey would produce a 50% bullish reading."
Now that both insights have been fulfilled, the next question is -- WHAT do the objective measures say about the market's next big move?