A Global Pattern

You are no doubt aware of the saying “sell in May and go away”. It is one of the best-known and oldest stock market truisms.

 

Mark Twain’s famous saying about stock market speculation (the other one was “There are two times in a man’s life when he should not speculate – when he cannot afford it, and when he can”).  From a seasonal perspective he was definitely right about September and October. [PT]

 

The saying is in fact justified based on statistics. I most recently discussed the subject in the April 24, 2019 issue of Seasonal Insights.  In the eleven largest markets in the world, stocks on average posted a gain of 8.07% in the winter half-year, while the gain achieved in the summer half-year amounted to a mere 0.26%.

 

Global stock market returns during summer vs. winter periods –  almost the entire return was generated in the winter months.

 

The division into two time periods of equal length is merely a matter of convention though. Greater precision is possible, as I will demonstrate below.

 

The Precise Seasonal Pattern of the MSCI World Index

The MSCI World Index is widely used as a proxy for global stock markets. However, one needs to be aware that US stocks have a weighting of more than 50% in the index. Thus it represents a disproportionately small share of the stock markets of other countries. The chart below shows its seasonal pattern.

This is not a standard price chart; instead it depicts the average pattern of the MSCI World Index that emerges in the course of a calendar year. The horizontal axis shows the time of the year, the vertical axis the average percentage moves of the index over the past 30 years. The seasonal trends of the index can be discerned at a glance.

 

MSCI World Index, seasonal pattern over the past 30 years. Global stock markets tend to exhibit seasonal weakness between the end of July and early October.

 

As can be seen, the MSCI World Index typically declines within the summer half-year from late July until early October. However, it tends to rise moderately until the end of July, and only begins to weaken thereafter.

This demonstrates the importance of precise seasonal pattern analysis. I have highlighted the seasonally weak period in the MSCI World Index in blue on the chart. It starts on July 31 and ends on October 10.

 

The MSCI World Index Declined in 16 Cases out of 30

But what were the returns generated by the index in individual years? The following bar chart shows the return of the MSCI World Index between July 31 and October 10 in every year since 1989. Green bars indicate years in which the index rose, red bars show years in which it declined.

 

MCSI World Index, percentage return between July 31 and October 10 in individual years since 1989. Large losses were recorded on several occasions, with the worst reaching 33.39 percentage points

 

The color red is clearly dominant in this illustration. While declines did not occur at a significantly greater frequency than rallies (16 vs. 14), the declines were far larger than the rallies.

In short: over the coming two and a half months, the probability that stock prices will rise is almost equal to the probability that they will fall. However, if a decline does happen, it is likely to be especially strong. In other words, a dangerous time period lies directly ahead.

 

Check out the Seasonal Patterns of Other Instruments as well

What are the seasonal patterns of individual country indexes? And are there perhaps individual stocks that enter a strong seasonal phase at this particular juncure?  With the help of the exact daily charts of Seasonax, seasonal trends can be identified with precision. Moreover, detailed statistics can be accessed with a single mouse click. Simply navigate to www.app.seasonax.com, where numerous instruments can be examined free of charge.

PS: Pay attention to both strong and weak seasonal periods to improve your returns!

 

Dimitri Speck specializes in pattern recognition and trading systems development. He is the founder of Seasonax, the company which created the Seasonax app for the Bloomberg and Thomson-Reuters systems. He also publishes the website www.SeasonalCharts.com , which features selected seasonal charts for interested investors free of charge. In his book The Gold Cartel (published by Palgrave Macmillan), Dimitri provides a unique perspective on the history of gold price manipulation, government intervention in markets and the vast credit excesses of recent decades. His ground-breaking work on intraday patterns in gold prices was inter alia used by financial supervisors to gather evidence on the manipulation of the now defunct gold and silver fix in London. His Stay-C commodities trading strategy won several awards in Europe; it was the best-performing quantitative commodities fund ever listed on a German exchange. You can find an introduction to the Seasonax app and in-depth information on what it can do here. Furthermore, here is a complementary page on the web-based Seasonax app, which costs less and offers slightly different functionality (note: subscriptions through Acting Man qualify for special discounts – for both the Bloomberg/Reuters and the web-based versions of the app. Details are available on request – simply send a note to info@acting-man.com with the header Seasonax!).

 

Charts by: Seasonax

 

Image caption by PT

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Silver “Scarcifies” – Precious Metals Supply and Demand
      On Monday, Silver got Scarcer – and Simpler On 23 July, we said:   “Well, it’s complicated.”   The action on 27 July was not.   Silver spot price vs. September basis   Notice the big drop in the basis starting around midnight (London time). It falls from over 7% to under 2%. To refresh: Basis = Future(bid) - Spot(ask) For the first two and half hours, the spot price is not moving. So, the only way the basis can drop is if the price...
  • Silver Explodes — But Why? Precious Metals Supply and Demand
      Explosive Days in Silver The silver market witnessed another explosive day! At midnight (in London), the price of the metal was $26.90. By 9pm, it had rocketed up to $28.95, a gain of 7.6%. This is not normal. But then, we are not in a normal world.   After several years of going nowhere and a downside fake-out in March this year, silver has come to life rather dramatically... [PT]   The Republicans are spending like drunken Modern Monetary Sailors. And...
  • Best Laid Schemes
      A Really Neat Bridge   But, Mousie, thou art no thy-lane, In proving foresight may be vain; The best-laid schemes o’ mice an’ men Gang aft agley, An’ lea’e us nought but grief an’ pain, For promis’d joy! – Robert Burns, To a Mouse, on Turning Her Up in Her Nest With the Plough (in extract), 1785     Installation of the final cable support pipes on the Gerald Desmond bridge replacement. Here is a drone video of the project. [PT] Photo by...
  • The Dollar Is Dying
      Insulting the Captive Audience This week, while perusing the Federal Reserve’s balance sheet figures, we came across a rather curious note.  We don’t know how long the Fed’s had this note posted to its website.  But we can’t recall ever seeing it.  The note reads as follows:   “The Federal Reserve’s balance sheet has expanded and contracted over time.  During the 2007-08 financial crisis and subsequent recession, total assets increased significantly from $870...

Support Acting Man

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

     
    Buy Silver Now!
     
    Buy Gold Now!