This is one of the oldest sayings in the stock market and, believe it or not, it actually has a lot of truth in it.
The stock market has a bullish seasonality that starts at the beginning of October and extends to the end of April. Normal seasonality until October calls for the market to just chop sideways until October. That is the period we are in now.
There is something called the Presidential Cycle which then modifies the normal seasonality. We have a sitting president running so that also affects the seasonality.
Normally, the stock market basically goes higher all during the year with just a pause in September and October when a sitting president is running. There are several reasons:
- The market likes certainty so they like the continuity of a sitting president
- The sitting president and Congress usually throw as much money as possible at the economy to boost the economy to get themselves elected.
- The Fed gets browbeaten by the President and grudgingly loosens monetary policy.
But let's be honest. This year is not normal by a long shot The Covid Crisis has decimated what was a strong economy. So we might want to not give as much weight to the Presidential Cycle as normal.
So I am falling back on simply using the normal seasonality which calls for chop until September, then a drop, then a big rally in November and December.
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