October Almanac: A Choppy Month in Post-Election Years By: Christopher Mistal & Jeffrey A. Hirsch | September 21, 2017 | Email | Print

 

But October has also been a turnaround month—a “bear killer”. Twelve post-WWII bear markets have ended in October: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002 and 2011 (S&P 500 declined 19.4%). However, eight were midterm bottoms. This year is neither a midterm year nor is a bear market in progress, thus October’s performance in past post-election years is of greater importance.

 

Post-election year October’s are neither great nor bad since 1953, ranking mid-pack across DJIA, S&P 500, NASDAQ and Russell 1000 with gains averaging from 0.7% (DJIA) to 1.2% (NASDAQ). DJIA has the best historical odds for gains having advanced in 11 of the last 16 post-election year Octobers. Despite the best average gain, NASDAQ actually has the worst record, declining in 6 of the last 11 post-election year Octobers. A 12.8% gain in 2001 boosts its average. Should a meaningful decline materialize in October it is likely to be an excellent buying opportunity, especially for any depressed technology and small-cap shares.

 

 

Options expiration week in October provides plenty of opportunity. On the Monday before expiration the DJIA has only been down eight times since 1980 and the Russell 2000 is up twenty of the last twenty-seven years, seventeen straight from 1990 to 2006. Expiration day has a spotty record as does the week as a whole. After a market bottom in October, the week after is most bullish, otherwise it is susceptible to downdrafts.

 

October is also the end of the Dow and S&P 500 “Worst 6 Months” and NASDAQ “Worst 4 Months”. Remain on the alert for our Seasonal MACD Buy Signal that can occur anytime beginning October 1. An email Alert will be sent when it triggers. At that time we will likely establish new long positions in SPDR DJIA (DIA), SPDR S&P 500 (SPY), PowerShares QQQ (QQQ) and iShares Russell 2000 (IWM) and we may also pickup any remaining open recommendations from the ETF Portfolio. We will also close out defensive positions and cover any outstanding short trades.