Fast and furious

September 26, 20114 Comments

 

 

 

 

I speak with Brooke Thackray once in a while about upcoming seasonal trends. Brooke, along with Don Vialoux, are Canada’s authorities in the area of following broad market, sector and stocks for buy and sell patterns that emerge on the calendar. You can visit Brooke’s website at http://www.alphamountain.com/ . Don’s popular technical website is available at http://www.dvtechtalk.com

 

Brooke and I were discussing  when the market might put in its typical autumn bottom in order to move into a traditional winter rally. While we both acknowledged that there are many “shoes” out there ready to drop on investors heads without a moment’s notice, there are some traditionally strong entry dates coming up that should be noted. Of those entry dates, the strongest might be around October 10th, and another near the end of October/very beginning of November.

I read one argument by noted technical analyst Ron Meisels (http://www.phases-cycles.com) suggesting that a winter rally peak would likely occur by the end of the year. A 107 day cycle that Ron follows also suggests a temporary market bottom at or around October 7th—which coincides nicely with the seasonal dates that Brooke Thackray talks about.

 

All in, I’d venture that we’ll be seeing a temporary reprieve and rally from the recent volatility after the first couple of weeks of October. I view the potential for trading this market from that point as a short termed play. Given the background of problems out there, it is my opinion that a rally, should it occur, will be fast and furious. I noted on this blog a couple of weeks ago that we may have entered into a “Phase 4” bear market. Thus, a rally into my previously targeted 1250 – 1300 area for the S&P 500 may be all we get. I for one will be looking to sell aggressively if/as/when that occurs.

 

Sectors that may be worth playing for the near termed upside potential of the markets include the U.S. technology sector and the consumer discretionary sector. Charts of their respective SPDR’s show a short termed rising trend, and of course some seasonal factors coming into play. Another sector that may be worth watching is the energy sector. Although not in favor from a seasonal perspective, energy may be an interesting play as an oversold candidate for a year-end spike. It has not yet broken a trendline that was established in July of 2009.

 

Any rally, no matter how strong and how long, will be facing strong headwinds into the resistance levels I’ve noted above, and a fundamental background of uncertainty. The rock group Trooper may have said it best when they sang “We’re here for a good time. Not a long time.” My sentiments exactly.

4 Comments

  • Hi Keith,
    Thanks for sharing your outlook on the markets.
    I feel oblidged to mention to you that I visit your blog every week.Last week I did NOT see the posting for “winter rally”. I saw it today.(I visited your blog twice last week & assumed you r on Vacation).It happened once in the summer too.Maybe other visitors can give you the feedback or is it just my computer.
    From seasonality do you see the rally extending to apr-jun 2012 OR it might end early this time??
    Thanks

    Reply
    • Given the relatively low upsdie potential, I won’t be surprised to see the market peak much earlier during the seasonal cycle–my guess is early winter some time. I’m focused on those 1240 – 1300 levels rather than a specific date.

      Reply
  • Interesting, your comments on energy. Last year, XEG started a strong uptrend on August 26th that peaked on March 7th this year. That was a nice little 43.5% gain. But last year was anything but typical, what with QE II. But energy is now so far oversold that something has to happen. We are currently only $0.84 from the July ’09 low you mentioned above.

    Reply

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