The S&P suffered a minor correction yesterday. This was followed by a turndown in RSI and MACD on the daily chart, signalling a short termed correction. Stochastics has rounded over. Divergence in those indicators is also noted. The correction occurred near the top of a trend channel that I have noted on this blog in the past. At this juncture, I wouldn’t expect too much downside (perhaps a few %) given the strong moneyflow indicators (top and bottom panes). A correction to the 50 day MA (green line) might be reasonable.
Weather impacts investors
Ming Dong and Andreanne Tremblay of York University recently published a study on investor behavior and weather patterns. They took 5 variables – sunshine, wind speed, rain, depth of snow, and temperature to gauge nominal stock market index returns from 1973 to 2012. Countries were classified as cold nations and warm nations (guess which classification we in Canada live in?). It would appear that, even with instant access to fundamental news flow and analysis, weather still trumps traditional analysis. They found that both longer termed patterns and daily fluctuations of weather conditions can generate high volatility –even in the absence of stock market or economic news. Cold weather, for example, stimulates risk seeking and stock buying.
Dong and Tremblay’s study seems to offer further explanation behind seasonal investing strategies, as documented by Yale Hirsch, Don Vialoux and Brooke Thackray over the years.
If you are a Globe & Mail subscriber, you can read more on this study at http://www.theglobeandmail.com/report-on-business/rob-commentary/rob-insight/how-cold-weather-heats-up-stock-buying/article19301046/#dashboard/follows/