Trader’s Narrative

In an attempt to thoroughly confuse my remaining few readers, here are two polar takes on the market:

Seasonality
The best time to be long the stock market has been from November to the end of April. The months from May to October, produce so little in returns - on average - that you would do better parking your money to earn income. This seasonal pattern is usually expressed with the rhyme: “Sell in May and go away”.

Now, this is just a historical pattern and it doesn’t perfectly play out each year. But over time this has been the average performance. So now we have seasonality working against us, rather than with us.

As well, Hulbert did a quick study showing that winter months that have produced negative returns go on to produce negative returns in the summer as well. But winter months that have produced positive returns buck the “sell in may” trend and continue the positive performance.

The only good news from the data mining is that the summer months following down winter months have much higher volatility. So for those who are equally comfortable going long and short, we may have perfect trading weather breaking on the horizon.

Oracle of Dow Theory
On the plus side, Richard Russell, is unapologetically super-bullish. Russell believes that the bull market never really left. Even the 2000-2002 bear market was just a “correction” within a continuing secular bull market that began in early 1980’s.

He bases this on two reasons: during the darkest days of the bear market in 2002, we never really got to a true bear market valuation. Two, from a technical point of view the market has been building a base.

Russell is worth listening to because he has seen decades of market history and he has studied it closely day after day. There was a time when he was a frequent writer for Barron’s. This was way back when Barron’s had a technical analysis bent, before it jumped the shark.