The months roll along and good ole Keystone gets older. Before looking at November's seasonality, a look backwards at September, one of the expected worse months of the year, proved to be correct, and October, which typically finishes positive, showed stellar performance not seen in many years. Although October is associated with the historic stock market crashes in history, those are one-off events, and October typically finishes up and is a good time to buy for the expected largest gains in the market that occur between November and April. The point being that October was not as much an upside surprise as the media made it out to be. When October finishes positive, as it did, then the Dow Industrials are typically up 1.3% for the November that follows.
November is the month when turkey's try to hide from Farmer Brown. After the Thanksgiving meal, the men lay on the couch, with a belt buckle loosened, watching football in between bouts of nodding off from the tryptophan ingestion. The markets will be closed Thursday, 11/24/11, to enjoy the holiday. Markets will also close early at 1 PM EST on Friday, 11/25/11. This day after Thanksgiving is known as Black Friday, which used to represent the largest retail day of the year, hence, many companies went into the black with their strong sales this day. In recent years, other dates nearer Christmas have taken the lead as the largest retail sales day, but the day after Thanksgiving is always in the top three.
The month has 21 trading days. This first week of November begins with four trading days. The monthly Jobs Report is the first Friday, 11/4/11. Next week, the week of 11/7/11, is five full trading days. OpEx week is the week of 11/14/11 so watch for the Tuesday to Wednesday market buoyancy from 11/15/11 to 11/16/11. Housing Starts is vital data on 11/17/11. OpEx Friday, 11/18/11, is typically an up day. The Thanksgiving holiday week begins 11/21/11 and will consist of 3 1/2 days of trading, the markets are closed on Thursday with a half day Friday. This Friday day of trading is typically the most likely up day of the entire year. Typically, markets are buoyant in front of a holiday. The month closes with three days of trading and the month ends on a Wednesday.
November, on average, finishes up 0.9%. That would be an upward move in the SPX of about 11 points for the month. The largest gains in the market are made from November thru April (typically a 7.2% gain over this five-month period); flat returns May thru October. Many traders look to invest money in early November although this year does not appear typical. Q4 is typically the best quarter during the year with an average return of 4.3% during October-December. Tech and biotech are typically strong in Q4.
November and December are typically considered the two best months to buy stocks with traders getting in on the ground floor to take advantage of the bullish November to April period. Pro's look at buying a New York REIT, such as NLY, since much of Wall Street bonuses are spent on real estate, but, perhaps the bonuses will be paltry this year. The NLY daily chart is agreeable to some buoyancy in line with this seasonality but the weekly chart forecasts much lower prices in the weeks ahead thus nimbleness would be the operative word.
An old Wall Street adage says, "Buy on Thanksgiving and sell on New Years to pay the Christmas bills," thus, markets typically reward the long players from mid-November into the first week of January. Congress in session is a market negative. The markets are buoyant when Congress is not in session so keep an eye on the political schedule. Congress will be a major news maker this month since an agreement must be reached on budget cuts by 11/23/11, the day before Thanksgiving, and then a final vote occurs the day before Christmas. All the rating agency downgrade fears will be reexplored this month, obviously a market negative.
Watch the retail sector and holiday spending closely since this will push the broad markets one way or the other. Retail stocks typically peak 12/1/11, and this year looks to be occurring earlier. Steel stocks typically run up from November into the end of the year. Traders like to buy steels the last week of November and sell them the last week of December, and short them in January. AKS sees upside option action today, perhaps some traders already have this seasonality play in mind. Tread softly since this year is anything but typical. The Dawali Festival is in November so gold buying in India tends to trail off afterwards. Some investment houses close out their books ending November so this sometimes leads to EOM selling. Markets are typically down one-half percent for the final two days of November.
On the more esoteric side, several palindromes occur this month, all the single digit days early in the month are palindromes, also the 11th and 22nd; 11-1-11, 11-2-11, 11-3-11, etc... This has no significance as far as trading is concerned although it always pays to keep your radar up during these days. Palindromes are letters or numbers that read the same forwards or backwards, such as "Some men interpret nine memo's." (Read it backwards) Also of interest will be 11:11 AM on 11/11/11, not that anything special should happen, the time will probably come and go unnoticed, but then again, that will be a time and day to pay attention.
The Nationwide EAS (Emergency Alert System) will conduct a test on the broadcast air waves (television) on 11/9/11, Wednesday, at 2 PM EST. No trading disruption is anticipated but it is another day and time to pay attention.
Keystone's Eclipse Indicator highlights certain areas of the year as potential large market selling event areas. The May-June sell off occurred, mid July and late July sell offs as well. Markets are in this eclipse window currently, a couple weeks or so on each side of 11/3/11, say from late October thru mid-November, so simply be aware of this. Markets tend to be buoyant at the full moon and tend to sell on the new moon. The Full Moon this month is 11/10/11 and the New Moon is 11/25/11, the day after Thanksgiving, Friday, which is a shortened trading session. Interestingly, the projection for any selling on 11/25/11 due to the new moon is in direct conflict with the expected result that this is the most likely day of the year to show a positive market move.
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