November Almanac: Best Three Consecutive Months Begins By: Jeffrey Hirsch & Christopher Mistal | October 26, 2016 | Email | Print

 

November maintains its status among the top performing months as fourth-quarter cash inflows from institutions drive November to lead the best consecutive three-month span November-January. The month has taken hits during bear markets and November 2000, down –22.9% (undecided election and a nascent bear), was NASDAQ’s second worst month on record—only October 1987 was worse.

 

November’s is a mixed bag in presidential election years. DJIA has advanced in 9 of the last 16 election years since 1952 with an average gain of 1.5%. Significant DJIA declines occurred in 2008 (-5.3%) and 2000 (-5.1%). For S&P 500 November ranks second with a similar record to DJIA. NASDAQ, Russell 1000 and Russell 2000 are not as strong ranking #8, #6 and #8 respectively. Fewer years of data (11 for NASDAQ and 9 for Russell indices) combined with sizable losses in 2000 and 2008 drag down rankings and average gains.

 

 

Options expiration often coincides with the week before Thanksgiving. DJIA posted ten straight gains 1993-2002 and has been up 18 of the last 23 weeks before Thanksgiving. The Monday of expiration week had been streaky with the DJIA up five straight, 1994-1998, during the bulk of the last 20th Century bull market, down five in a row, 1999-2003, up three, 2004-2006, but has been mixed since 2007, up four and down four. The net result is a modestly bullish up eight of the last twelve. Options expiration day has a clearly bullish bias, up 12 of the last 14. The week after expiration has been improving lately with S&P 500, NASDAQ, Russell 1000 and 2000 up four straight.

 

Being a bullish month November has six bullish S&P days, though it does have weak points. NASDAQ and Russell 2000 exhibit the greatest strength at the beginning and end of November. Russell 2000 is notably bearish on the 12th trading day of the month (November 16, 2016), when the small-cap benchmark has risen just five times in the last 32 years (since 1984). The Russell 2000’s average decline is 0.49% on the day. Recent weakness around Thanksgiving has shifted DJIA and S&P 500 strength to mirror that of NASDAQ and Russell 2000 with the majority of bullish days at the beginning and end of the month. The best way to trade Thanksgiving is to go long into weakness the week before the holiday and exit into strength just before or after.