Conclusions:
● Virtually all Stock Market gains since 1950 occurred in the November through April period.
● Five year histories are too short for reliable forecasting.
● Virtually all Stock Market gains since 1950 occurred in the November through April period.
● Five year histories are too short for reliable forecasting.
Introduction:
With September 22 being the date of the Fall Equinox it seems appropriate to evaluate the effect of the
Spring/Fall Equinox Cycle on stock prices. It's power is substantial. The fall and spring equinoxes mark the
beginning of fall and spring respectively. Days and nights are of equal length on the date of either equinox.
Daytime is shortest in the winter on the day of the winter solstice ( Dec 21 or 22). The days lengthen until the
summer solstice, the longest day of the year (around June 22). Then the days shorten until the winter Solstice.
The spring equinox this year was March 20th.
The proposition that seasons influence the financial cycles may challenge theories that veteran investors have
formed through years of observation. The evidence presented herein spans more than a century. Please give
this theory your earnest consideration. An objective seeker of knowledge will follow the evidence... wherever it
leads.
With September 22 being the date of the Fall Equinox it seems appropriate to evaluate the effect of the
Spring/Fall Equinox Cycle on stock prices. It's power is substantial. The fall and spring equinoxes mark the
beginning of fall and spring respectively. Days and nights are of equal length on the date of either equinox.
Daytime is shortest in the winter on the day of the winter solstice ( Dec 21 or 22). The days lengthen until the
summer solstice, the longest day of the year (around June 22). Then the days shorten until the winter Solstice.
The spring equinox this year was March 20th.
The proposition that seasons influence the financial cycles may challenge theories that veteran investors have
formed through years of observation. The evidence presented herein spans more than a century. Please give
this theory your earnest consideration. An objective seeker of knowledge will follow the evidence... wherever it
leads.
1) Historical Summary: The 50 Year, 100 Year and 4 Year Record
| Spring / Fall Equinox Cycle - Compounded Returns β |
|
* These are not annual returns. They represent 6 month DJIA returns.
Analysis:
From 1950 through 2004, ALL of the stock markets annual gains are concentrated in November -
April. The average compounded return for the 55 Nov -April periods was 7.62%. The average
compounded return for the 55 May - Oct periods was - 0 .1%. Dividends were excluded.
From 1900 through 2004, 86% of the stock markets annual gains are concentrated in November -
April. The average compounded return for the 105 Nov -April periods was 4.27%. The average
compounded return for the 105 May - Oct periods was .68%. Dividends were excluded.
From 2001 through 2004 the equinox effect was very pronounced. 4 years is a relatively short period for
statistics on the stock market and will deviate greatly from results observed in longer periods. The reader is
cautioned against making forecasts based on data from such a short time span. Short periods are often
affected by influences that vanish after just a few years... and the expected market action vanishes with them.
The volatility of annual returns is evident from the yearly returns that you will find at the end of this article.
From 1950 through 2004, ALL of the stock markets annual gains are concentrated in November -
April. The average compounded return for the 55 Nov -April periods was 7.62%. The average
compounded return for the 55 May - Oct periods was - 0 .1%. Dividends were excluded.
From 1900 through 2004, 86% of the stock markets annual gains are concentrated in November -
April. The average compounded return for the 105 Nov -April periods was 4.27%. The average
compounded return for the 105 May - Oct periods was .68%. Dividends were excluded.
From 2001 through 2004 the equinox effect was very pronounced. 4 years is a relatively short period for
statistics on the stock market and will deviate greatly from results observed in longer periods. The reader is
cautioned against making forecasts based on data from such a short time span. Short periods are often
affected by influences that vanish after just a few years... and the expected market action vanishes with them.
The volatility of annual returns is evident from the yearly returns that you will find at the end of this article.
Implications:
The Spring / Fall Equinox Cycle is one of many tools that may improve investor's skill in interpreting the action
of the markets. It provides evidence that market movements are not random... evidence that there are cyclic
forces pushing, then pulling the market... evidence for the timing of the market's next change of direction.
However, it is just one piece of a complex puzzle. It should not be used as a "stand alone" indicator.
SignalTrend's Stock Market Timing System has produced a far greater return of 15% / year. If a cycle is present
from the horse and buggy days through the atomic age, one should consider the probability that it is not a
temporary aberration but an intrinsic part of equity cyclic behavior.
The correlation is too great, too consistent and continues over too long a period to dismiss as mere
coincidence. The century contained war and peace, booms and busts, crises, panics, discoveries and
achievements. It also saw the rise and fall of technologies, industries, empires and ideologies. Man's attention is
drawn to those readily visible events. We tend to attribute the rise and fall of the stock market to those visible
and emotional events which gain the attention of the media. To the contrary, much of the markets movement
can be correlated with unseen influences like the Equinox Cycle. The effect of the equinoxes is not visible when
viewing one year at a time as it appears to make its mark steadily and without fanfare. It's effect is often masked
by visible and supposedly dominating forces which rise, fall and then are replaced by different and opposing
forces. The effect of the equinoxes on the market can only be observed when analyzing many years at a time.
Some events can be more clearly seen from a distance. This is one such event.
No attempt will be made presently, to explain why the apparent correlation between the equinoxes and the stock
market exists. Scientific, political, commercial, biological and psychological influences are some of the
possibilities.
The Spring / Fall Equinox Cycle is one of many tools that may improve investor's skill in interpreting the action
of the markets. It provides evidence that market movements are not random... evidence that there are cyclic
forces pushing, then pulling the market... evidence for the timing of the market's next change of direction.
However, it is just one piece of a complex puzzle. It should not be used as a "stand alone" indicator.
SignalTrend's Stock Market Timing System has produced a far greater return of 15% / year. If a cycle is present
from the horse and buggy days through the atomic age, one should consider the probability that it is not a
temporary aberration but an intrinsic part of equity cyclic behavior.
The correlation is too great, too consistent and continues over too long a period to dismiss as mere
coincidence. The century contained war and peace, booms and busts, crises, panics, discoveries and
achievements. It also saw the rise and fall of technologies, industries, empires and ideologies. Man's attention is
drawn to those readily visible events. We tend to attribute the rise and fall of the stock market to those visible
and emotional events which gain the attention of the media. To the contrary, much of the markets movement
can be correlated with unseen influences like the Equinox Cycle. The effect of the equinoxes is not visible when
viewing one year at a time as it appears to make its mark steadily and without fanfare. It's effect is often masked
by visible and supposedly dominating forces which rise, fall and then are replaced by different and opposing
forces. The effect of the equinoxes on the market can only be observed when analyzing many years at a time.
Some events can be more clearly seen from a distance. This is one such event.
No attempt will be made presently, to explain why the apparent correlation between the equinoxes and the stock
market exists. Scientific, political, commercial, biological and psychological influences are some of the
possibilities.
2) Historical Summary: Five Year Periods Examined
| 5 Year Periods |
| May - Oct* |
| Superior |
| Nov - April* |
| 1901 - 1905 1906 - 1910 1911 - 1915 1916 - 1920 1921 - 1925 1926 - 1930 1931 - 1935 1936 - 1940 1941 - 1945 1946 - 1950 1951 - 1955 1956 - 1960 1961 - 1965 1966 - 1970 1971 - 1975 1976 - 1980 1981 - 1985 1986 - 1990 1991 - 1995 1996 - 2000 |
| 10.00% -1.70% 2.20% -9.50% 10.90% 6.20% -3.30% -8.40% -0.50% 3.20% 10.60% 5.00% 7.70% 1.10% 6.30% 5.30% 7.40% 11.80% 8.70% 13.70% |
| -3.30% -1.69% 1.80% 3.60% 5.30% -4.90% 0.70% 7.10% 8.60% 0.80% 4.60% -0.26% 1.70% -3.90% -5.60% -2.70% 2.40% -0.50% 5.10% 2.10% |
| Nov - April May - Oct Nov - April May - Oct Nov - April Nov - April May - Oct May - Oct May - Oct Nov - April Nov - April Nov - April Nov - April Nov - April Nov - April Nov - April Nov - April Nov - April Nov - April Nov - April |
e
e
e
(World War I, 1914 - 1918)
(The Great Depression)
(The Great Depression)
(The Great Depression)
e
e
(World War I, 1914 - 1918)
(The Great Depression)
(The Great Depression)
(The Great Depression)
* These are not annual returns. They represent compounded 6 month
DJIA returns during the corresponding periods. β
DJIA returns during the corresponding periods. β
Analysis:
The inconsistency of the first 35 years of the century illustrate the futility of using a short period like
5 years to forecast the next 5 years. The 5 year winner changed nearly every 5 years.
It appears that the Nov - April portion of the year outperformed overall until the onslaught of the Great
Depression. The infrastructure of the financial system was damaged. The stock market collapsed.
Unemployment reached 25%. There was no such thing as social security... no such thing as "going on
unemployment". Many in this country went hungry. It was a daily occurrence for the unemployed to knock on the
doors of homes to ask if they could work for a meal. Accordingly, it possible for such extreme events to override
an otherwise consistent cycle.
After the end of World War II in 1945, Nov - April has reigned supreme.
The end of World War II marked the end of the Great Depression and the preeminence of the U. S. as a world
military power. During this century, the economy transitioned from and agricultural economy to an industrial
one. Possibly there is a correlation between these events and the increasing consistency of the Equinox cycle.
Possibly not. Nevertheless, we all benefit from things that we don't fully understand. Electricity, television,
religion and the internet are just a few examples.
The inconsistency of the first 35 years of the century illustrate the futility of using a short period like
5 years to forecast the next 5 years. The 5 year winner changed nearly every 5 years.
It appears that the Nov - April portion of the year outperformed overall until the onslaught of the Great
Depression. The infrastructure of the financial system was damaged. The stock market collapsed.
Unemployment reached 25%. There was no such thing as social security... no such thing as "going on
unemployment". Many in this country went hungry. It was a daily occurrence for the unemployed to knock on the
doors of homes to ask if they could work for a meal. Accordingly, it possible for such extreme events to override
an otherwise consistent cycle.
After the end of World War II in 1945, Nov - April has reigned supreme.
The end of World War II marked the end of the Great Depression and the preeminence of the U. S. as a world
military power. During this century, the economy transitioned from and agricultural economy to an industrial
one. Possibly there is a correlation between these events and the increasing consistency of the Equinox cycle.
Possibly not. Nevertheless, we all benefit from things that we don't fully understand. Electricity, television,
religion and the internet are just a few examples.
3) Historical Summary: The Yearly Record
| Year |
| May - Oct* |
| Superior |
| 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 |
| 11.7% 7.4% 1.0% 8.0% 9.7% 25.5% -4.4% -9.0% 23.6% 2.5% -16.5% 10.8% 7.1% -10.1% -23.2% 35.8% -17.8% -2.0% 0.2% 1.9% -26.1% 21.4% 17.5% 7.5% 9.9% -0.3% -4.1% 16.3% 24.4% -3.3% 0.8% -32.1% -30.3% 46.9% 12.0% 8.6% 2.7% -15.2% -6.1% -17.9% -3.8% -17.0% -10.1% 11.5% 4.2% 12.3% 12.3% -4.0% -6.4% 3.7% 12.0% 12.9% 3.8% -4.1% 30.6% 13.0% 10.0% -2.2% 12.4% 12.3% -6.0% 14.5% 0.6% 11.2% 6.4% 6.4% -6.2% 17.5% -0.1% -5.9% 2.1% 19.1% 14.4% -19.6% -8.9% 35.9% 21.8% -6.3% 2.3% 9.2% 1.6% 6.2% 2.3% 20.4% -6.7% 16.9% 16.5% 17.3% 5.8% 16.1% 4.1% 13.2% 8.5% 5.9% -3.8% 21.3% 16.4% 15.5% 22.5% 25.9% -8.2% 9.9% -1.4% 8.4% 5.2% |
| -3.7% -15.0% -1.4% -29.2% 29.2% 10.1% 2.6% -31.6% 18.7% 12.2% -1.7% -9.4% 0.5% -0.3% -9.7% 33.8% 16.5% -20.1% 10.3% 28.0% -9.2% -7.1% 3.6% -10.0% 14.8% 30.4% 4.6% 10.7% 19.2% -14.3% -34.3% -30.3% 10.3% 13.5% -7.1% 27.6% 21.6% -20.7% 36.3% 18.2% -9.3% 2.0% 19.6% 2.1% 7.6% 12.8% -18.2% 6.6% 4.5% 8.8% 5.0% 1.3% 4.5% 0.4% 10.3% 6.9% -7.0% -10.8% 19.1% 3.7% -3.5% 3.7% -11.3% 5.2% 7.7% 4.2% -13.6% -1.9% 4.4% -9.9% 2.6% -10.9% 0.1% 3.8% -20.5% 1.8% -3.2% -11.7% -5.4% -4.6% 13.1% -14.6% 16.9% -0.1% 3.1% 9.2% 5.3% -12.8% 5.7% 9.4% -8.1% 6.3% -4.0% 7.4% 6.1% 10.0% 8.3% 6.2% -5.2% -0.5% 2.2% -15.5% -15.6% 15.6% -1.9% |
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
Nov - April
May - Oct
May - Oct
May - Oct
Nov - April
Nov - April
Nov - April
May - Oct
May - Oct
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
May - Oct
May - Oct
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
Nov - April
May - Oct
May - Oct
May - Oct
Nov - April
Nov - April
Nov - April
May - Oct
May - Oct
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
May - Oct
Nov - April
May - Oct
May - Oct
May - Oct
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
May - Oct
Nov - April
Nov - April
Nov - April
Nov - April
Nov - April
May - Oct
Nov - April
Nov - April
May - Oct
Nov - April
* These are not annual returns. They represent 6 month DJIA
returns during the corresponding periods.
returns during the corresponding periods.
β
Compounded Return (also called Internal Rate of Return): These figures represent the compounded
return for the subject periods. They are not average returns. The following will illustrate the difference
between the two:
If you invest $1000 and have a 50% loss followed by a 50% gain, what is your return for the 2
periods?
Calculation by Averaging:
Averaging the returns indicates that the investor broke even. The average of those two returns is Zero.
(-50% + 50%)/2=0%.
Calculation by Compounding:
The compounded return indicates a 25% loss. ($1000 -50%=$500 remaining at the end of the first period.
$500 + 50% =$750 remaining at the end of the second period. Having begun with $1000 and ended with
$750 after the 2 periods, the investor has incurred a 25% loss. [(750/1000-1)]. Compounding is the
appropriate method in this case.
return for the subject periods. They are not average returns. The following will illustrate the difference
between the two:
If you invest $1000 and have a 50% loss followed by a 50% gain, what is your return for the 2
periods?
Calculation by Averaging:
Averaging the returns indicates that the investor broke even. The average of those two returns is Zero.
(-50% + 50%)/2=0%.
Calculation by Compounding:
The compounded return indicates a 25% loss. ($1000 -50%=$500 remaining at the end of the first period.
$500 + 50% =$750 remaining at the end of the second period. Having begun with $1000 and ended with
$750 after the 2 periods, the investor has incurred a 25% loss. [(750/1000-1)]. Compounding is the
appropriate method in this case.
 |
| SignalTrend Inc. 2005 All Rights Reserved. Terms of Use / Disclaimer Contact Us |
| Spring - Fall Equinox Cycle (Current Issue of SignalTrend's Strategy Research) |
 | |  | |  | |  | |  | |  | |  |
| Nov - April* |
SignalTrend
Signals the Trend... in Stocks and Interest Rates Backtested 100 Years !