Chimpcast: The Seasonal Pattern in Stocks

One of the strongest forces in the stock market has been seasonality. A vast amount of historical data clearly confirms the existence and reliability of certain price patterns during specific times of the year. Some of the most accurate price moves in the Dow Jones industrial average and S&P are based on seasonal tendencies. While no trading system or method is perfect, seasonality ranks among the best.

If seasonality in the stock market has taught us anything, it is that July and August tend to be unpredictable months and that the last quarter of the year is often the strongest of the entire year. As such, it should come as no surprise that short-term downtrends continue; that market sentiment continues negative; that forecasters have turned pessimistic; and that trading volume should be decreasing.

Here is our point by point evaluation of the current stock market situation for the Dow Jones and S&P:

  • short-term trend remains lower
  • the intermediate trend remains higher with prices at or below technical support
  • the long-term trend remains higher with prices still above support
  • small trader sentiment remains low, which means that the public is not particularly bullish on stocks, which in turn is a bullish development
  • geopolitical factors have not significantly affected prices, which may have contributed to the relatively sideways trend since beginning of 2015
  • seasonals remain sideways to bearish at this time of the year
  • gold prices and energy prices: expect low to develop very soon
  • the last quarter of 2015 should be bullish with stocks ending toward the high of the year
  • we continue to recommend buying quality stocks at intermediate term support or at long-term support

Best of trading chimp,

Chimp Jake