Moe’s B2B World

This year, the seasonal market trends were a bust. Most plainly did not work out.

But, that actually is nothing novel. If you do a 25 year graphic representation on the main indices, you will observe that a number of years simply do not work. However what you will also find out is that in the majority of years, they generally do.

What does this indicate for us going into 2010?

It means that 2009 was one of those uncommon years where seasonality did not work meaning that in 2010, seasonality will probably work again.

The first recurring trend will be upon us in just a couple of weeks, so let’s do a fast review.

The stock market has comparatively consistent and dependable seasonal trends. You should know the most important seasonal trends, given that this knowledge can prevent you from being overly bullish at a seasonal peak or extremely bearish at a seasonal low.

In a nutshell, the common trends support a drop in early January (maybe profit-taking selling), followed by a mid-January rally. By late March or early April the market often reaches a peak, followed by a shifting market in mid-April, perhaps related to the April 15 tax deadline. The early summer months are often characterized by a midsummer rally, culminating in a market top in late July or early August. September and October are typically down months in the stock market (witness the 1929 Crash and the 1987 October decline), with the lows happening sometime in late October (a good buying opportunity?). The trend into the end of the year is typically bullish, with the first two weeks in December characterized by a healthy market. The Christmas holidays are normally gentle, with irregular and thin markets. There are continually exceptions to these genuine trends, but the general pattern is amazingly consistent.

Print this article if you have to and stick it near your trading screen. I think that because 2009 was a rare bust for a good number of the cyclic trends discussed above, 2010 will be an on year. One of the biggest mistakes amateur traders make is that they get sniped by more sophisticated fighters who know the seasonality trends.

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This entry was posted on Wednesday, December 16th, 2009 at 2:23 am and is filed under Business.You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.