Thread: Dow headed for best October ever

Dow headed for best October ever

October 27, 2011, 11:48 AM

With a little more than two trading days left in the month, it is shaping up to be the best October ever for the Dow Jones Industrial Average. And that is saying something, since the Dow has existed since 1896, 115 years ago.

As of mid-day trading on Thursday, the Dow INDU is ahead more than 11% for the month. The previous record for the month of October was held by 1982, when the Dow turned in a 10.7% return. That’s an auspicious historical precedent, since that month came very early in that decade’s spectacular bull market which, arguably, didn’t end until nearly 20 years later.

The stock market’s impressive rally in recent weeks has confirmed the wisdom of those advisers who, in early October, urged investors to get a jump start on the so-called Halloween Indicator. That indicator, of course, is based on the stock market’s seasonal pattern to turn in its best returns between Halloween and the subsequent May Day. Their advice is motivated in part by the growing popularity of this indicator, which means that more and more investors are jumping the gun and not waiting until Halloween to get back into the stock market.

Those early birds have certainly gotten the worm this year.

- Mark Hulbert

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November, December historically hot months for stocks

By Matt Krantz, USA TODAY
Updated 11h 20m ago

History shows November and December are typically two of the strongest months for stocks. The iconic bull statute in the financial district of New York is seen here decorated for the holidays.

Investors looking for clues on where stocks are headed might want to try glancing at the calendar.

Stocks are entering what is typically the strongest time of the year, November and December, prompting hopes seasonality could give the stock market added momentum following its big rebound this month.

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"It's unforgivable to sell in October," says Ken Winans of money manager Winans International. "You'd regret you did."

Seasonality, at least according to history, is about to swing to stocks' favor. November is tied with April for being the second-best month of the year, with the Standard & Poor's 500 rising 1.5% on average during the month since 1950, says the Stock Trader's Almanac. And that comes ahead of December, which has been the best month, adding 1.7% on average.

Investors using history as a guide for the stock market's outlook have been:

•Spot on this year so far. Another much-watched indicator, "Sell in May and go away" might be an old saw, but it worked perfectly in 2011.

Investors who bailed out on the first trading day of May avoided a nasty tangle with a near-bear market in which the S&P fell 19.2% from the end of April to the 2011 low on Oct. 3. Anyone who followed the advice last year avoided a six-month period where the S&P fell 1.6% and briefly lost 10% in 15 minutes during the Flash Crash.

•Reasonably accurate long term. Stocks have worked their way higher 67% of the time in November and 69% in December since 1969, says Craig Johnson at Piper Jaffray.

November and December are even better for the S&P excluding the '50s and most of the '60s, Johnson says. December and November are the top two months for the S&P 500 back to 1969, rising about 1.7% in each month, he says.

•Dovetailing into critical flows of money. The end of the year not only kicks off greater consumer spending but also traditional moves by the Federal Reserve to increase money supply, says Marshall Nickles, professor of economics at Pepperdine University.

Yet, there are skeptics. For one thing, November last year wasn't a great month with the S&P falling 0.2%. Meanwhile, Jeffrey Hirsch of the Stock Trader's Almanac wonders if some of the year-end gains have already occurred, considering the S&P 500 is up 13% from its Oct. 3 low.

"I don't buy into any rules of thumb," says Hugh Johnson of Johnson Illington Advisors. "Sometimes they're right, sometimes they're wrong and you don't know which it will be in any given year."

http://www.usatoday.com/money/perfi/sto ... 50939566/1