October Brings A Return To Positive Seasonality

The Market managed to survive the most bearish month of the year without suffering too badly. Actually, the S&P 500 gained 3.0% this past month.  Now we are faced with a turn back to a positive seasonal bias for the next six months, according to our Stock Trader’s Almanac.  The month of October ranks 7th in average performance of the S&P since 1950, registering +0.8% — a whole lot better than September’s -0.6% average return.  Results in post-election years, such as 2013, are only slightly less positive at +0.7% but still around the middle of the pack compared to other months’ returns.

Importantly, October turns more bullish later in the month, but also marks the end of the worst six-month period of the year (since May).  The Almanac shows that the average return of the Dow Jones Industrial Average since 1950 is +7.5% from November through April, while the six months leading up to the end of October only registers +0.3%.  See the above PDF document for details on October and the best-six-months trading strategy.  Should stocks retreat over the next few weeks, it could be viewed as a buying opportunity before the long-term rally restarts its climb.