Observations:
● The Dow gained 2.6% in September.
● 7 of 10 Octobers lost money when they followed a profitable September.
● The DJIA gained 4.7% in the 3rd quarter.
● Midyear Octobers perform best after a declining 3rd quarter.
● The Dow made a new all time high this week.
● The Dow gained 2.6% in September.
● 7 of 10 Octobers lost money when they followed a profitable September.
● The DJIA gained 4.7% in the 3rd quarter.
● Midyear Octobers perform best after a declining 3rd quarter.
● The Dow made a new all time high this week.
| Summary: The Dow rose 2.6% in September. Since 1975, 7 of 10 Octobers lost money when they followed a profitable September. The average October loss was 2%. In the 25 years prior to 1975, the September - October relationship was quite different. During 1950 - 1974, only 5 of 11 Octobers lost money when they followed a profitable September. The second year of a presidential term is referred to as a "midyear". Therefore, every fourth year is a midyear. It is an election year but not a presidential election year. The 3rd quarter return for the DJIA was a 4.7% gain. Since 1950, Octobers in a midyear have averaged a .5% gain after a profitable 3rd quarter and a 6.6% gain after a declining 3rd quarter. On 10/3/06 the DJIA recorded a new all time high of 11,727.34. It has taken over 6.5 years to exceed the Dow's 1/14/2000 record of 11,723. There have been only 4 times since 1896 that the Dow has taken over 6 years to achieve a new all time high. The average return 2 years after those new highs was -1.4%. There may be reasons for bullishness but don't count this new high as one of them. How can I use this information? Midyear Octobers are typically strong as the previous issue of Investment Tips explained. (You may review the previous issue by clicking the link below.) However, when the 3rd quarter is strong, the historical evidence urges us to downgrade our October expectations. Poor returns following profitable Septembers represent additional evidence leading to the same conclusion... The odds no longer appear to favor a strong October. Don't allow recent gains leading to the Dow's new all time high to convert you into a long term bull. Be emotionally prepared to shift to bearish positions. As previous Investment Tips issues suggest, abundant reasons for a downturn exist. SignalTrend's unemotional computer timing system is currently bullish, but it may change its buy / sell signal in the near future. If that happens, SignalTrend will notify you by email. Remember, SignalTrend's stock market timing system was backtested 100 years with excellent results! P. S. The above research on the relationship between September and October was initiated by a request from one of SignalTrend's subscribers... a stockbroker of some 25 years. If you have a topic or theory you would like to know more about, please fill out the "Suggest a Topic" field below and click submit. If your topic is accepted, SignalTrend will do the calculations for you using our computer programs and extensive database. We want you to get the most out of your subscription to SignalTrend! All of the above data is for the Dow Jones Industrial Average (DJIA) excluding dividends. |
| Link to Previous Issue of Investment Tips |
| Will October Bring Profit or Pain? Part I Click the above link to see the 56 year record. The answer may surprise you! |
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| 10/6/06 |
| Will October Bring Profit or Pain? Part II Proprietary Graphs, Tables and Analyses - All Rights Reserved |
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