How To Trade Stocks Appropriately During Distinctive Times Of The Year
This year, the seasonal market trends were a bust. Most just did not pan out.
Nonetheless, that really is not anything new. If you do a 25 year graphic representation on the major indices, you will see that some years simply don’t happen as expected. However what you will also appreciate is that in the majority of years, they usually do.
What does this suggest for us going into 2010?
It means that 2009 was one of those rare years where seasonality did not work meaning that in 2010, seasonality will in all probability work again.
The initial cyclic trend will be upon us in just a couple of weeks, so let’s do a fast review.
The stock market has rather consistent and dependable cyclic trends. You should recognize the most prominent recurring trends, because this information can prevent you from being too bullish at a recurring peak or excessively bearish at a seasonal low.
In a nutshell, the general trends favor a decline 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 changing market in mid-April, possibly 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 usually down months in the stock market (witness the 1929 Crash and the 1987 October decline), with the lows taking place 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 typically gentle, with irregular and thin markets. There are continually exceptions to these legitimate trends, but the general pattern is really consistent.
Print this article if you have to and stick it near your trading monitor. I think that because 2009 was a uncommon bust for the majority 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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