Granite Wealth Management

Seasonality. Amplified.

Seasonality, Amplified

Against a global macro environment filled with things to worry about, the stock market has already ripped 10% from the October low.

What could the market be telling us? Fundamentally, the consensus view seems to be landing on a Federal Reserve that is done hiking due to a weakening consumer and plunging inflation readings. We suspect the answer is never quite so simple but on a big picture basis, fair enough.

Have we already seen a repeat of the October 2022 bear killing low? Or is this bounce happening merely because In season.

I’ve certainly been seeing a lot of recent headlines and television mentions of positive seasonal trends lately, so let’s dig into that concept a bit further.

How might this play out?

According to Stock Trader’s Almanac (we highly recommend picking up a copy of Jeffrey Hirsch’s annual bible on markets), any one of the following by itself would have solid implications for market performance.

Santa Claus Rally. December has historically been one the best months of the year, particularly the December 15th to 30th timeframe.

First “week” of January. The first five trading days of the New Year tend to forecast trends for the full year.

Month of January.  This is worth monitoring for whether it confirms the signal from the first trading week of January (or doesn’t).

If just one of these factors gave a bullish signal, the outlook is positive.  However, a combination of 2 or 3 of these can have an amplifier effect.

What to watch for:

When two of these three indicators play out positively, the market does quite well.

When all three are up, an explosive upside move is likely.

Forward looking market forecasts, be It bearish or bullish, can be confirmed by action during these critical periods.

Consider adding to your positions (we favor growth, technology, and building) if market performance confirms the October bottom and the favorable seasonal trends. If we see negative market action, consider adopting a trader’s strategy during this still promising season.