Contrarian Alert Stocks
6 responses | 1 like
Started by joj - April 7, 2022, 6:06 p.m.

So I watch the talking heads on the financial networks.  There are one or 2 people who are actually pretty smart and I am more inclined to be persuaded by them than to be fading them.  But when everyone is leaning on one side of the boat ...look out.

Futures markets are currently pricing in 3 consecutive 50 point rate hikes followed by 3 more 25 point hikes.  I'm inclined to believe that the Fed means business as every few days they march out someone else to brandish their hawkish intentions.

ALL the market pundits are proclaiming a gruesome bear market in stocks is at hand as one "should not fight the Fed".   The logic is sensible but the market are holding up pretty well.

There is statistical evidence that there is a lag time between Fed tightening and stock market decline.  Seasonably, April is the strongest month of the year (I think). Bear follows the seasonal more than I.

Comments
By metmike - April 7, 2022, 6:59 p.m.
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joj,

I love threads/posts like this that get the gears turning in our heads.

You commented about stock seasonals (on top of the main point).

Looking that information up, led to learning something new. Thanks man!

Historically, April is at the end (and is included) of the best 6 months of stocks performing their best.

I never realized there was such a contrast.

+++++++++++++++++++++++++

October 31 marks the end of the worst six months for stocks. Here’s how to take advantage.


The best six-month period for stocks starts November 1

The Stock Trader’s Almanac shows the stark contrast in the performance of the stock market between the six-month periods beginning May 1 and November 1. From 1950 through 2018, stocks in the Dow Jones Industrial average posted an average annualized return of just 0.6% from May 1 to October 31. The average annualized return investing from November 1 to April 30: 7.5%.

To put that in perspective, a $10,000 investment in the May-October period would have netted you $1,461 after 69 years, according to the Stock Trader’s Almanac. Investing during the November-April period would have made you more than $1 million.

Stock market seasons

      The Dow Jones Industrial Average posted an average 8% gain between November and April from 2010 through 2018, compared to just a 2% gain in the other half of the year.      DJIA percent change

metmike: I would argue that the numerical calculations that they did are extremely erroneous but an 8% gain compared to a 2% gain is very significant.

By metmike - April 7, 2022, 7:08 p.m.
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Here was the absolute best find from looking up more information related to your thread joj.

You can understand a specific market much better by going to historical graphs and seasonally averaged prices over long periods for just that market but these charts below tell you more information about ALL the markets on 1 page related to seasonal strength than I've ever seen!

Equity Clock

http://www.equityclock.com/seasonality/

Sector Seasonality




By joj - April 8, 2022, 6:05 a.m.
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Great seasonal link Mike.  Thanks.

If I understood it correctly, it gave the seasonal tendency by dates, but not the actual strength (mild tendency or strong tendency).

Still, worth knowing.  I'm interested in Bear's thoughts....

By metmike - April 8, 2022, 12:04 p.m.
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Here's a graph that might be more useful to you joj.

Of course this AVERAGE does not take into account the unique dynamics each year.

This year is as unique as it gets and those dynamics, if strong enough can easily overcome the average of all the other years(if they oppose them) or greatly enhance them if they are in the same direction.

Stock Market Seasonality Explained – Find out the right time to buy stocks.

https://tradeproacademy.com/stock-market-seasonality-explained-find-right-time-buy-stocks/


By metmike - April 8, 2022, 12:05 p.m.
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What do YOU think bear?

By bear - April 15, 2022, 10:47 p.m.
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the old adage is sell in may and go away.  this is because the best gains are between october, and may.  stocks are sometimes weaker from june thru oct.  

but... during a strong bull market it may not go down much in summer.  

i look at the general stock market, not so much in a seasonal way but just in terms of valuations, and probabilities.

when stocks are grossly overpriced, then it is not very probable that you will get a good return over the next 5 to 10 years. 

you are better off holding gold and gold mines until the market gets back down to fair value or lower.