Seasonal patterns for the summer

Allow me to quote John Murphy’s recent message from his blog on www.stockcharts.com

 

“Most corrections occur during the late summer/ early autumn period. The two weakest months of the year are usually August and September. October often starts off weak and ends up strong, which makes it a tricky month. A lot of corrections and bear markets have bottomed during October. That makes the August through early October period the most dangerous of the calendar year. July normally experiences a summer bounce before the trend weakens again.”

 

Below is a seasonal chart going back 10 years for the S&P 500. You’ll note the underperformance of that index during August and September in particular.

Seasonal Stock Patterns: Seasonal Chart for the S&P500 from 2008 to 2017

Interestingly, the TSX seems to buck the US markets trend with May and June being crumby months – whereas August and September weren’t too shabby. The 10 year seasonal chart from stockcharts.com illustrates this.

Seasonal Stock Patterns: Seasonal Chart of TSX for 2008 to 2017

Explanations for that phenomenon might be due to the start of the positive seasonal patterns on some of our key commodities. Seasonally there is a major positive seasonal pattern for gold—and minor positive patters for silver, copper, crude oil. Further, you sometimes see the Canadian banks begin to move a bit better from late summer and on- I’ve discussed the technical pattern on this blog.

Keep an eye open for any weakness in the next couple of months –it may create opportunities.

9 Comments

  • Hi Keith

    I respect and read your blog for a technical perspective. I have even ordered your book Sideways, will get it by Monday. Your analysis is always a nice technical viewpoint.

    But I see the markets are just rallying new highs, despite short term technical deterioration(like, no new ROC).
    Whenever they try to correct, it is very short term, a day or few days and then they rally to new highs.

    Do you think it is normal, based on your past experience?
    Do you think the markets are over-stretched??
    Do you think there is a co-ordinated efforts on the part of Central Banks around the world to keep the markets up and intervene, whenever there is a little correction.

    Highly appreciate your comments.

    thanks and regards

    kumaril

    Reply
    • Kumaril-thanks for the comments
      Yes, markets are weakening wehn we look at some of the momentum divergence. I think there can be a case made for a 5% pullback–the reasons behind that are on this blog:
      https://www.valuetrend.ca/sp-500-uptrend-interim-pullback-likely/
      The only factor that has changed since that blog is the daily chart rounded look–the S&P has popped up to the top of its trading range again which eliminated that rounded topping pattern. But all of the other conditions exist.

      Reply
  • Keith, what your thoughts on CAD ? Very strong reversal in last 3 weeks or so …

    Reply
      • It was a great call Keith on currency , but what now? ….if CAD breaks above 80 c then new trend starting or bounc back down from the resistance and continue downtrend ?

        Reply
        • Mike–it hasn’t happened yet ($0.80 breakout)–so lets just see. In fact, it hasn’t yet broken my “more likely” target of $0.79
          For what its worth–you may recall that I noted on my “follow the red line” blog that I am looking to convert a fairly big chunk of CDN to USD for a personal US property. I converted half of it a couple of days ago. I am going to do the other half as things play out. If we get 0.79 or 0.80 then start to drop, I will do the other half. If it blows through 0.80 (which I feel is unlikely), then I will wait and see if it can get to 0.84. I will not hold my breath waiting for that to happen.

          Reply
          • sounds good , lets wait and see 🙂

  • Would you consider trimming or adding to the position in utilities with special importance on pipelines? The dividends can generally be around 5% to 7%? Brooke Thackray thinks that they do well seasonally in the summer. It seems to me that the dividend can be protection for about 5% to 7% in the stocks. I would appreciate your opinion. Thanks.

    Reply
    • Yes, we tend to hold a bit more dividend positions over the summer–we have a pipeline.

      Reply

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