Hond Financial

This year, the seasonal market trends were a bust. Nearly everyone just did not pan out.

However, that really is not anything new. If you do a 25 year chart on the major indices, you will observe that a few years simply do not work. But what you will also appreciate is that in the majority of years, they generally do.

What does that indicate for us going into 2010?

It means that 2009 was one of those odd years where seasonality did not work meaning that in 2010, seasonality will most likely work again.

The opening cyclic trend will be upon us in just a couple of weeks, so let’s do a fast review.

The stock market has fairly consistent and reliable seasonal trends. You must be aware of the most important seasonal trends, because this information can prevent you from being excessively bullish at a cyclic peak or excessively bearish at a seasonal low.

In a nutshell, the general trends support a decline in early January (maybe profit-taking selling), followed by a mid-January rally. By late March or early April the market often reaches a peak, followed by a shifting market in mid-April, maybe related to the April 15 tax deadline. The early summer months are frequently characterized by a midsummer rally, culminating in a market top in late July or early August. September and October are usually down months in the stock market (witness the 1929 Crash and the 1987 October decline), with the lows taking place sometime in late October (a good buying opportunity?). The trend into the end of the year is typically bullish, with the first two weeks in December characterized by a robust market. The Christmas holidays are typically gentle, with jerky and thin markets. There are always exceptions to these actual trends, but the general pattern is extraordinarily reliable.

Print this article if you have to and stick it near your trading screen. I believe that because 2009 was a unusual bust for nearly all of the cyclic trends discussed above, 2010 will be an on year. One of the main mistakes amateur traders make is that they get sniped by more sophisticated fighters who know the seasonality trends.

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