Frank Cappelleri, Chief Market Technician at Instinet, examines S&P seasonality and asks whether the market is likely to rally in November and December.
Looking at a Chart of S&P seasonality, Cappelleri notes how the SPX has followed October’s historical path well – getting hit hard early on, bottoming and extending the rest of the month. While he says we cannot expect the market to comply to history so tightly in November, it may still be useful to be aware of the 20 year average.
On average, the S&P undergoes an early extension of the late October strength, a mid month slowdown and then a month-end rally. Given the strong push in October’s final three weeks, he thinks a pause in the action soon would not be unexpected. The key will be how low that next dip takes us. A higher low would keep the 4th quarter rally on track.
Looking more closely at the last decade, Cappelleri says the average November- December move is +1.6%. 2009 was the best; 2018, the worst. Overall, the 4th quarter has the best record of all quarters (see Table). There has never been two straight negative 4th quarters since 2007-08 and only four in total since 1928.