Keystone's November Seasonality for Trading the Markets

October results in the first down month for the SPX after four consecutive up months. November is the start of the seasonally strong pattern for stocks from November thru April where the largest gains on the long side occur in the markets.

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, 11/22/12, to enjoy the holiday. Markets will also close early at 1 PM EST on Friday, 11/23/12. This day after Thanksgiving is known as Black Friday, which used to represent the largest retail day of the year where many companies turn profitable on the year due to the strong sales this day.  In recent years, other dates nearer Christmas have taken the lead as the largest retail sales day, such as the Saturday before Christmas, but the day after Thanksgiving remains in the top three retail sales days for the year. Retailers are concerned this year since a small spike occurred in October sales due to Hurricane Sandy. Sales were likely pulled forward and will ultimately hurt the holiday sales. Further, money will be spent on house repairs and getting lives back in order rather than buying the new turtleneck or a cashmere sweater. Retail stocks typically peak 12/1/12.

November has 21 trading days.  This first week of November begins with two trading days.  The monthly Jobs Report is the first Friday, 11/2/12. Next week, the week of 11/5/12, is five full trading days.  OpEx week is the week of 11/12/12 so watch for the Tuesday to Wednesday market buoyancy from 11/13/12 to 11/14/12. OpEx Monday's, 11/12/12, tend to be positive as well. Housing Starts are important on 11/20/12. The Thanksgiving holiday week begins 11/19/12 and will consist of 3 1/2 days of trading, the markets are closed on Thursday with a half day Friday. Volume will be light during this week. The shortened Friday session is typically the most likely up day for the markets of the entire year. Typically, markets are buoyant in front of a holiday. The month closes with a full week of trading ending on a Friday.

November, on average, finishes up 0.9%. That would be an upward move in the SPX of about 13 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 occur May thru October. Many traders look to invest money in early November and the action yesterday, 11/1/12, did not disappoint with a strong upside rally of over one percent for the major indexes to begin the month.  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. 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, as well as the fiscal cliff drama, is a market negative.

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 then short them in January. The move higher for steels may be happening early since some have leaped higher and are not attractive moving forward. The Dawali Festival is in November so gold buying in India tends to trail off afterwards. There is also now an increasing interest in diamonds in lieu of gold. 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.

Keystone's Eclipse Indicator highlights certain areas of the year as potential large market selling event areas. The April top this year was marked by this technique. Markets are in this eclipse window currently from 10/20/12 thru 12/20/12.  The period over the next week, and then the period between Thanksgiving and Christmas, are especially targeted for a large market selloff.  Interestingly, the markets dropped 4% over the last couple weeks but the eclipse indicator selloffs are typically far more serious. Markets tend to be buoyant at the full moon and tend to sell off moving into the new moon.  The new moon this month is 11/13/12, also the solar eclipse, and the full moon is 11/28/12, also the lunar eclipse. Bradley turn dates are 11/1/12 and 11/14/12 so November may prove to be a dramatic month with at least a couple trend changes on tap for markets.

The U.S. Presidential election is Tuesday, 11/6/12, so markets will react wildly the following day. Type 'Presidential' into the search box above to review potential plays depending on whether President Obama retains his seat, or, if Governor Romney wins.  The ECB rate decision and press conference is Thursday, 11/8/12, and a rate cut may be on tap. Europe must weaken the euro so a growth path can be established for this trouble continent.  The 18th Party Congress in China begins 11/8/12.  Troika is targeting a decision on Greece on 11/12/12 but this has been delayed from August thru now so do not hold your breathe.  The Spain bailout request drama continues. The ECB cannot institute its OMT bond-buiying program until Spain formally requests the bailout. This is required since Spain will be expected to accept conditionality and oversight to receive the funds. Spain is hesitant to give up part of their sovereignty.  The Catalonia regional elections are 11/25/12 so a Spain bailout request is probably unlikely until late November or December.