This year, the seasonal market trends were a bust. The majority simply did not pan out.
But, that really is nothing novel. If you do a 25 year graphic representation on the major indices, you will notice that a few years simply don’t happen as expected. But what you will also notice is that in the majority of years, they generally do.
What does that mean for us going into 2010?
It means that 2009 was one of those unusual years where seasonality did not work meaning that in 2010, seasonality will probably work again.
The first recurring trend will be upon us in just a couple of weeks, so let’s do a quick review.
The stock market has fairly consistent and dependable seasonal trends. You ought to recognize the most prominent cyclic trends, given that this information can stop you from being extremely bullish at a recurring peak or excessively bearish at a seasonal low.
In a nutshell, the general trends favor a decline in early January (maybe profit-taking selling), followed by a mid-January rally. By late March or early April the market often reaches a peak, followed by a shifting market in mid-April, conceivably related to the April 15 tax deadline. The early summer months are regularly characterized by a midsummer rally, culminating in a market top in late July or early August. September and October are usually down months in the stock market (witness the 1929 Crash and the 1987 October decline), with the lows occurring sometime in late October (a good buying opportunity?). The trend into the end of the year is typically bullish, with the first two weeks in December characterized by a robust market. The Christmas holidays are normally calm, with irregular and thin markets. There are continually exceptions to these valid trends, but the general pattern is extraordinarily dependable.
Print this article if you have to and stick it near your trading screen. I reason that because 2009 was a rare bust for the majority of the cyclic trends discussed above, 2010 will be an on year. One of the biggest errors amateur traders make is that they get sniped by more sophisticated fighters who know the seasonality trends.
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