- The headline is a mathematical truth.
- Seasonality failed on the downside.
- Are you buying stocks today?
We are officially heading into what has historically been the best three-month stretch of the year for stocks, November through January.
This is the sweet spot for equities, the part of the calendar where the past tells us it’s paid the most to be long.
What makes this setup even more interesting is just how strong stocks have already been during what’s supposed to be the weakest stretch of the year.
When seasonality fails to work on the downside, it often signals underlying strength.
This summer was one of the best on record for stocks. Now that seasonality is shifting from headwind to tailwind, the question becomes:
How strong can this year-end rally get?
Let’s find out.
The Most Bullish Day
“Buy in October and get yourself sober.”
That’s how my friend Jeff Hirsch — editor of the legendary Stock Trader’s Almanac — taught me to remember it.
October marks the end of the market’s worst six-month stretch and the beginning of its most favorable period: the November-to-January sweet spot.
But the real question is, when in October is the optimal time to buy?
According to Jeff deGraaf at Renaissance Macro, that day is today.
Take a look at this chart from RenMac showing average forward three-month returns for every day of the year:
Today is the most bullish day on the calendar. No other day offers better three-month forward returns.
That lines up perfectly with October’s reputation as the “bear killer” – the month where bear markets come to die and new bull markets are born.
Only this time, there’s no bear market to kill.
The Nasdaq-100 just closed last week at its highest level ever. On Tuesday – just two days ago – the Dow Jones Industrial Average posted its highest daily close ever, and that index goes back to the 1800s.
So we’re not entering the strongest seasonal stretch from a position of weakness. We’re doing it from a position of strength.
Stocks Do Better in Uptrends
When you look back through history, one thing becomes clear: Stocks perform best when they’re in uptrends.
That might sound like common sense. And you might roll your eyes hearing it out loud.
But you’d be surprised how many professionals around the world forget that simple truth.
Stocks are in uptrends. This is a bull market. And today marks the start of the most bullish three-month stretch of the year.
So I have one question: Are you buying stocks?
I am.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs